Correlation Between Dimensional International and WisdomTree Japan
Can any of the company-specific risk be diversified away by investing in both Dimensional International and WisdomTree Japan 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 International and WisdomTree Japan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional International Value and WisdomTree Japan Hedged, you can compare the effects of market volatilities on Dimensional International and WisdomTree Japan 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 International with a short position of WisdomTree Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional International and WisdomTree Japan.
Diversification Opportunities for Dimensional International and WisdomTree Japan
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dimensional and WisdomTree is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional International Valu and WisdomTree Japan Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Japan Hedged and Dimensional International 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 International Value are associated (or correlated) with WisdomTree Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Japan Hedged has no effect on the direction of Dimensional International i.e., Dimensional International and WisdomTree Japan go up and down completely randomly.
Pair Corralation between Dimensional International and WisdomTree Japan
Given the investment horizon of 90 days Dimensional International is expected to generate 1.06 times less return on investment than WisdomTree Japan. But when comparing it to its historical volatility, Dimensional International Value is 1.37 times less risky than WisdomTree Japan. It trades about 0.41 of its potential returns per unit of risk. WisdomTree Japan Hedged is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 13,755 in WisdomTree Japan Hedged on November 22, 2025 and sell it today you would earn a total of 2,908 from holding WisdomTree Japan Hedged or generate 21.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional International Valu vs. WisdomTree Japan Hedged
Performance |
| Timeline |
| Dimensional International |
| WisdomTree Japan Hedged |
Dimensional International and WisdomTree Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional International and WisdomTree Japan
The main advantage of trading using opposite Dimensional International and WisdomTree Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional International position performs unexpectedly, WisdomTree Japan 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 Japan will offset losses from the drop in WisdomTree Japan's long position.The idea behind Dimensional International Value and WisdomTree Japan Hedged pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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