Correlation Between WisdomTree Japan and First Trust
Can any of the company-specific risk be diversified away by investing in both WisdomTree Japan and First Trust 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 Japan and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Japan SmallCap and First Trust Consumer, you can compare the effects of market volatilities on WisdomTree Japan and First Trust 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 Japan with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Japan and First Trust.
Diversification Opportunities for WisdomTree Japan and First Trust
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between WisdomTree and First is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Japan SmallCap and First Trust Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Consumer and WisdomTree Japan 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 Japan SmallCap are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Consumer has no effect on the direction of WisdomTree Japan i.e., WisdomTree Japan and First Trust go up and down completely randomly.
Pair Corralation between WisdomTree Japan and First Trust
Considering the 90-day investment horizon WisdomTree Japan SmallCap is expected to generate 0.97 times more return on investment than First Trust. However, WisdomTree Japan SmallCap is 1.03 times less risky than First Trust. It trades about 0.21 of its potential returns per unit of risk. First Trust Consumer is currently generating about 0.04 per unit of risk. If you would invest 9,333 in WisdomTree Japan SmallCap on October 4, 2025 and sell it today you would earn a total of 301.00 from holding WisdomTree Japan SmallCap or generate 3.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Japan SmallCap vs. First Trust Consumer
Performance |
| Timeline |
| WisdomTree Japan SmallCap |
| First Trust Consumer |
WisdomTree Japan and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Japan and First Trust
The main advantage of trading using opposite WisdomTree Japan and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Japan position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| WisdomTree Japan vs. WisdomTree SmallCap Quality | WisdomTree Japan vs. iShares MSCI Indonesia | WisdomTree Japan vs. WisdomTree Cloud Computing | WisdomTree Japan vs. Davis Select Financial |
| First Trust vs. First Trust Energy | First Trust vs. First Trust Consumer | First Trust vs. First Trust Europe | First Trust vs. First Trust Materials |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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