Correlation Between WisdomTree International and First Trust
Can any of the company-specific risk be diversified away by investing in both WisdomTree International 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 International 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 International SmallCap and First Trust Large, you can compare the effects of market volatilities on WisdomTree International 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 International with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree International and First Trust.
Diversification Opportunities for WisdomTree International and First Trust
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between WisdomTree and First is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International Small and First Trust Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Large and WisdomTree 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 WisdomTree International 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 Large has no effect on the direction of WisdomTree International i.e., WisdomTree International and First Trust go up and down completely randomly.
Pair Corralation between WisdomTree International and First Trust
Considering the 90-day investment horizon WisdomTree International is expected to generate 1.0 times less return on investment than First Trust. But when comparing it to its historical volatility, WisdomTree International SmallCap is 1.06 times less risky than First Trust. It trades about 0.24 of its potential returns per unit of risk. First Trust Large is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 8,186 in First Trust Large on November 2, 2025 and sell it today you would earn a total of 835.09 from holding First Trust Large or generate 10.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree International Small vs. First Trust Large
Performance |
| Timeline |
| WisdomTree International |
| First Trust Large |
WisdomTree International and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree International and First Trust
The main advantage of trading using opposite WisdomTree International and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree International 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.The idea behind WisdomTree International SmallCap and First Trust Large 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.
| First Trust vs. First Trust Mid | First Trust vs. First Trust Large | First Trust vs. First Trust Large | First Trust vs. First Trust Small |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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