Correlation Between WisdomTree Japan and WisdomTree SmallCap
Can any of the company-specific risk be diversified away by investing in both WisdomTree Japan and WisdomTree SmallCap 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 WisdomTree SmallCap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Japan Hedged and WisdomTree SmallCap Quality, you can compare the effects of market volatilities on WisdomTree Japan and WisdomTree SmallCap 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 WisdomTree SmallCap. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Japan and WisdomTree SmallCap.
Diversification Opportunities for WisdomTree Japan and WisdomTree SmallCap
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between WisdomTree and WisdomTree is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Japan Hedged and WisdomTree SmallCap Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree SmallCap 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 Hedged are associated (or correlated) with WisdomTree SmallCap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree SmallCap has no effect on the direction of WisdomTree Japan i.e., WisdomTree Japan and WisdomTree SmallCap go up and down completely randomly.
Pair Corralation between WisdomTree Japan and WisdomTree SmallCap
Given the investment horizon of 90 days WisdomTree Japan Hedged is expected to under-perform the WisdomTree SmallCap. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree Japan Hedged is 1.81 times less risky than WisdomTree SmallCap. The etf trades about -0.05 of its potential returns per unit of risk. The WisdomTree SmallCap Quality is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 5,177 in WisdomTree SmallCap Quality on October 26, 2024 and sell it today you would earn a total of 61.00 from holding WisdomTree SmallCap Quality or generate 1.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Japan Hedged vs. WisdomTree SmallCap Quality
Performance |
| Timeline |
| WisdomTree Japan Hedged |
| WisdomTree SmallCap |
WisdomTree Japan and WisdomTree SmallCap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Japan and WisdomTree SmallCap
The main advantage of trading using opposite WisdomTree Japan and WisdomTree SmallCap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Japan position performs unexpectedly, WisdomTree SmallCap 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 SmallCap will offset losses from the drop in WisdomTree SmallCap's long position.| WisdomTree Japan vs. WisdomTree Emerging Markets | WisdomTree Japan vs. WisdomTree SmallCap Quality | WisdomTree Japan vs. First Trust Emerging | WisdomTree Japan vs. First Trust Japan |
| WisdomTree SmallCap vs. WisdomTree Emerging Markets | WisdomTree SmallCap vs. WisdomTree Interest Rate | WisdomTree SmallCap vs. WisdomTree Japan Hedged | WisdomTree SmallCap vs. WisdomTree Interest Rate |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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