Correlation Between WisdomTree SmallCap and Invesco SP
Can any of the company-specific risk be diversified away by investing in both WisdomTree SmallCap and Invesco SP 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 Invesco SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree SmallCap Earnings and Invesco SP 500, you can compare the effects of market volatilities on WisdomTree SmallCap and Invesco SP 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 Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree SmallCap and Invesco SP.
Diversification Opportunities for WisdomTree SmallCap and Invesco SP
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between WisdomTree and Invesco is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree SmallCap Earnings and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 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 Earnings are associated (or correlated) with Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 500 has no effect on the direction of WisdomTree SmallCap i.e., WisdomTree SmallCap and Invesco SP go up and down completely randomly.
Pair Corralation between WisdomTree SmallCap and Invesco SP
Considering the 90-day investment horizon WisdomTree SmallCap is expected to generate 1.47 times less return on investment than Invesco SP. In addition to that, WisdomTree SmallCap is 1.1 times more volatile than Invesco SP 500. It trades about 0.18 of its total potential returns per unit of risk. Invesco SP 500 is currently generating about 0.29 per unit of volatility. If you would invest 3,167 in Invesco SP 500 on October 17, 2025 and sell it today you would earn a total of 134.00 from holding Invesco SP 500 or generate 4.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree SmallCap Earnings vs. Invesco SP 500
Performance |
| Timeline |
| WisdomTree SmallCap |
| Invesco SP 500 |
WisdomTree SmallCap and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree SmallCap and Invesco SP
The main advantage of trading using opposite WisdomTree SmallCap and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree SmallCap position performs unexpectedly, Invesco SP 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 Invesco SP will offset losses from the drop in Invesco SP's long position.The idea behind WisdomTree SmallCap Earnings and Invesco SP 500 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.
| Invesco SP vs. Invesco SP 500 | Invesco SP vs. Invesco Russell 1000 | Invesco SP vs. Invesco RAFI Strategic | Invesco SP vs. iShares ESG Advanced |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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