Correlation Between Dimensional International and WisdomTree Asia
Can any of the company-specific risk be diversified away by investing in both Dimensional International and WisdomTree Asia 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 Asia 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 Asia Defense, you can compare the effects of market volatilities on Dimensional International and WisdomTree Asia 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 Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional International and WisdomTree Asia.
Diversification Opportunities for Dimensional International and WisdomTree Asia
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dimensional and WisdomTree is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional International Valu and WisdomTree Asia Defense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Asia Defense 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 Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Asia Defense has no effect on the direction of Dimensional International i.e., Dimensional International and WisdomTree Asia go up and down completely randomly.
Pair Corralation between Dimensional International and WisdomTree Asia
Given the investment horizon of 90 days Dimensional International is expected to generate 1.43 times less return on investment than WisdomTree Asia. But when comparing it to its historical volatility, Dimensional International Value is 2.2 times less risky than WisdomTree Asia. It trades about 0.36 of its potential returns per unit of risk. WisdomTree Asia Defense is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 2,760 in WisdomTree Asia Defense on November 30, 2025 and sell it today you would earn a total of 691.00 from holding WisdomTree Asia Defense or generate 25.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.39% |
| Values | Daily Returns |
Dimensional International Valu vs. WisdomTree Asia Defense
Performance |
| Timeline |
| Dimensional International |
| WisdomTree Asia Defense |
Dimensional International and WisdomTree Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional International and WisdomTree Asia
The main advantage of trading using opposite Dimensional International and WisdomTree Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional International position performs unexpectedly, WisdomTree Asia 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 Asia will offset losses from the drop in WisdomTree Asia's long position.The idea behind Dimensional International Value and WisdomTree Asia Defense 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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