Correlation Between First Trust and WisdomTree SmallCap
Can any of the company-specific risk be diversified away by investing in both First Trust 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 First Trust and WisdomTree SmallCap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Europe and WisdomTree SmallCap Quality, you can compare the effects of market volatilities on First Trust 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 First Trust with a short position of WisdomTree SmallCap. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and WisdomTree SmallCap.
Diversification Opportunities for First Trust and WisdomTree SmallCap
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and WisdomTree is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Europe and WisdomTree SmallCap Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree SmallCap and First Trust 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 First Trust Europe 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 First Trust i.e., First Trust and WisdomTree SmallCap go up and down completely randomly.
Pair Corralation between First Trust and WisdomTree SmallCap
Considering the 90-day investment horizon First Trust Europe is expected to generate 0.63 times more return on investment than WisdomTree SmallCap. However, First Trust Europe is 1.59 times less risky than WisdomTree SmallCap. It trades about 0.51 of its potential returns per unit of risk. WisdomTree SmallCap Quality is currently generating about 0.17 per unit of risk. If you would invest 5,104 in First Trust Europe on September 29, 2025 and sell it today you would earn a total of 284.00 from holding First Trust Europe or generate 5.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Europe vs. WisdomTree SmallCap Quality
Performance |
| Timeline |
| First Trust Europe |
| WisdomTree SmallCap |
First Trust and WisdomTree SmallCap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and WisdomTree SmallCap
The main advantage of trading using opposite First Trust and WisdomTree SmallCap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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.| First Trust vs. First Trust Emerging | First Trust vs. First Trust Consumer | First Trust vs. First Trust Multi | First Trust vs. First Trust Natural |
| WisdomTree SmallCap vs. WisdomTree Japan SmallCap | WisdomTree SmallCap vs. iShares MSCI Sweden | WisdomTree SmallCap vs. iShares MSCI Emerging | WisdomTree SmallCap vs. JPMorgan Diversified Return |
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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