Correlation Between Dimensional Targeted and WisdomTree SmallCap
Can any of the company-specific risk be diversified away by investing in both Dimensional Targeted and WisdomTree SmallCap at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Dimensional Targeted and WisdomTree SmallCap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional Targeted Value and WisdomTree SmallCap Quality, you can compare the effects of market volatilities on Dimensional Targeted and WisdomTree SmallCap and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Dimensional Targeted with a short position of WisdomTree SmallCap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Targeted and WisdomTree SmallCap.
Diversification Opportunities for Dimensional Targeted and WisdomTree SmallCap
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Dimensional and WisdomTree is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Targeted Value and WisdomTree SmallCap Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree SmallCap and Dimensional Targeted is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Dimensional Targeted Value are associated (or correlated) with WisdomTree SmallCap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree SmallCap has no effect on the direction of Dimensional Targeted i.e., Dimensional Targeted and WisdomTree SmallCap go up and down completely randomly.
Pair Corralation between Dimensional Targeted and WisdomTree SmallCap
Given the investment horizon of 90 days Dimensional Targeted is expected to generate 1.04 times less return on investment than WisdomTree SmallCap. But when comparing it to its historical volatility, Dimensional Targeted Value is 1.01 times less risky than WisdomTree SmallCap. It trades about 0.14 of its potential returns per unit of risk. WisdomTree SmallCap Quality is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 5,138 in WisdomTree SmallCap Quality on August 30, 2024 and sell it today you would earn a total of 463.00 from holding WisdomTree SmallCap Quality or generate 9.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Targeted Value vs. WisdomTree SmallCap Quality
Performance |
| Timeline |
| Dimensional Targeted |
| WisdomTree SmallCap |
Dimensional Targeted and WisdomTree SmallCap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Targeted and WisdomTree SmallCap
The main advantage of trading using opposite Dimensional Targeted and WisdomTree SmallCap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Targeted position performs unexpectedly, WisdomTree SmallCap can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in WisdomTree SmallCap will offset losses from the drop in WisdomTree SmallCap's long position.| Dimensional Targeted vs. Dimensional Small Cap | Dimensional Targeted vs. Dimensional Core Equity | Dimensional Targeted vs. Dimensional International Value | Dimensional Targeted vs. Dimensional Equity ETF |
| WisdomTree SmallCap vs. WisdomTree Emerging Markets | WisdomTree SmallCap vs. WisdomTree Interest Rate | WisdomTree SmallCap vs. WisdomTree Japan Hedged | WisdomTree SmallCap vs. WisdomTree Interest Rate |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins |