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 Tactical 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
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and WisdomTree is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Tactical 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 Tactical 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
Given the investment horizon of 90 days First Trust is expected to generate 47.25 times less return on investment than WisdomTree SmallCap. But when comparing it to its historical volatility, First Trust Tactical is 7.48 times less risky than WisdomTree SmallCap. It trades about 0.04 of its potential returns per unit of risk. WisdomTree SmallCap Quality is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 5,113 in WisdomTree SmallCap Quality on August 28, 2024 and sell it today you would earn a total of 548.00 from holding WisdomTree SmallCap Quality or generate 10.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Tactical vs. WisdomTree SmallCap Quality
Performance |
| Timeline |
| First Trust Tactical |
| 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 Senior | First Trust vs. First Trust Low | First Trust vs. First Trust Enhanced | First Trust vs. First Trust TCW |
| 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 CEOs Directory module to screen CEOs from public companies around the world.
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