Correlation Between WisdomTree Europe and Select Sector
Can any of the company-specific risk be diversified away by investing in both WisdomTree Europe and Select Sector 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 WisdomTree Europe and Select Sector into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Europe SmallCap and Select Sector SPDR, you can compare the effects of market volatilities on WisdomTree Europe and Select Sector 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 WisdomTree Europe with a short position of Select Sector. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Europe and Select Sector.
Diversification Opportunities for WisdomTree Europe and Select Sector
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between WisdomTree and Select is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Europe SmallCap and Select Sector SPDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Sector SPDR and WisdomTree Europe 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 WisdomTree Europe SmallCap are associated (or correlated) with Select Sector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Sector SPDR has no effect on the direction of WisdomTree Europe i.e., WisdomTree Europe and Select Sector go up and down completely randomly.
Pair Corralation between WisdomTree Europe and Select Sector
Considering the 90-day investment horizon WisdomTree Europe SmallCap is expected to generate 1.38 times more return on investment than Select Sector. However, WisdomTree Europe is 1.38 times more volatile than Select Sector SPDR. It trades about 0.25 of its potential returns per unit of risk. Select Sector SPDR is currently generating about 0.26 per unit of risk. If you would invest 6,926 in WisdomTree Europe SmallCap on November 27, 2025 and sell it today you would earn a total of 796.00 from holding WisdomTree Europe SmallCap or generate 11.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Europe SmallCap vs. Select Sector SPDR
Performance |
| Timeline |
| WisdomTree Europe |
| Select Sector SPDR |
WisdomTree Europe and Select Sector Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Europe and Select Sector
The main advantage of trading using opposite WisdomTree Europe and Select Sector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Europe position performs unexpectedly, Select Sector 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 Select Sector will offset losses from the drop in Select Sector's long position.| WisdomTree Europe vs. WisdomTree International MidCap | WisdomTree Europe vs. iShares MSCI Turkey | WisdomTree Europe vs. iShares Currency Hedged | WisdomTree Europe vs. iShares MSCI Japan |
| Select Sector vs. First Trust Exchange Traded | Select Sector vs. Ultimus Managers Trust | Select Sector vs. Horizon Kinetics Medical | Select Sector vs. Harbor Health Care |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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