Correlation Between IShares International and WisdomTree SmallCap
Can any of the company-specific risk be diversified away by investing in both IShares International 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 IShares International and WisdomTree SmallCap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares International Select and WisdomTree SmallCap Dividend, you can compare the effects of market volatilities on IShares International 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 IShares International with a short position of WisdomTree SmallCap. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares International and WisdomTree SmallCap.
Diversification Opportunities for IShares International and WisdomTree SmallCap
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between IShares and WisdomTree is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding iShares International Select and WisdomTree SmallCap Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree SmallCap and IShares 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 iShares International Select 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 IShares International i.e., IShares International and WisdomTree SmallCap go up and down completely randomly.
Pair Corralation between IShares International and WisdomTree SmallCap
Considering the 90-day investment horizon IShares International is expected to generate 1.84 times less return on investment than WisdomTree SmallCap. But when comparing it to its historical volatility, iShares International Select is 1.43 times less risky than WisdomTree SmallCap. It trades about 0.06 of its potential returns per unit of risk. WisdomTree SmallCap Dividend is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,771 in WisdomTree SmallCap Dividend on August 31, 2024 and sell it today you would earn a total of 958.00 from holding WisdomTree SmallCap Dividend or generate 34.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares International Select vs. WisdomTree SmallCap Dividend
Performance |
| Timeline |
| iShares International |
| WisdomTree SmallCap |
IShares International and WisdomTree SmallCap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares International and WisdomTree SmallCap
The main advantage of trading using opposite IShares International and WisdomTree SmallCap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares International 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.| IShares International vs. iShares Core High | IShares International vs. SPDR SP International | IShares International vs. iShares Select Dividend | IShares International vs. iShares Emerging Markets |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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