Correlation Between WisdomTree SmallCap and First Trust
Can any of the company-specific risk be diversified away by investing in both WisdomTree SmallCap 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 SmallCap 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 SmallCap Quality and First Trust Japan, you can compare the effects of market volatilities on WisdomTree SmallCap 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 SmallCap with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree SmallCap and First Trust.
Diversification Opportunities for WisdomTree SmallCap and First Trust
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between WisdomTree and First is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree SmallCap Quality and First Trust Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Japan and WisdomTree SmallCap 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 SmallCap Quality 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 Japan has no effect on the direction of WisdomTree SmallCap i.e., WisdomTree SmallCap and First Trust go up and down completely randomly.
Pair Corralation between WisdomTree SmallCap and First Trust
Given the investment horizon of 90 days WisdomTree SmallCap Quality is expected to generate 1.09 times more return on investment than First Trust. However, WisdomTree SmallCap is 1.09 times more volatile than First Trust Japan. It trades about 0.15 of its potential returns per unit of risk. First Trust Japan is currently generating about -0.08 per unit of risk. If you would invest 5,138 in WisdomTree SmallCap Quality on August 29, 2024 and sell it today you would earn a total of 479.00 from holding WisdomTree SmallCap Quality or generate 9.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree SmallCap Quality vs. First Trust Japan
Performance |
| Timeline |
| WisdomTree SmallCap |
| First Trust Japan |
WisdomTree SmallCap and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree SmallCap and First Trust
The main advantage of trading using opposite WisdomTree SmallCap and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree SmallCap 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 SmallCap vs. WisdomTree Emerging Markets | WisdomTree SmallCap vs. WisdomTree Interest Rate | WisdomTree SmallCap vs. WisdomTree Japan Hedged | WisdomTree SmallCap vs. WisdomTree Interest Rate |
| First Trust vs. First Trust United | First Trust vs. First Trust Asia | First Trust vs. First Trust Germany | First Trust vs. First Trust Switzerland |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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