Correlation Between Small Cap and WisdomTree Investments
Can any of the company-specific risk be diversified away by investing in both Small Cap and WisdomTree Investments 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 Small Cap and WisdomTree Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Premium and WisdomTree Investments, you can compare the effects of market volatilities on Small Cap and WisdomTree Investments 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 Small Cap with a short position of WisdomTree Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and WisdomTree Investments.
Diversification Opportunities for Small Cap and WisdomTree Investments
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Small and WisdomTree is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Premium and WisdomTree Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Investments and Small Cap 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 Small Cap Premium are associated (or correlated) with WisdomTree Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Investments has no effect on the direction of Small Cap i.e., Small Cap and WisdomTree Investments go up and down completely randomly.
Pair Corralation between Small Cap and WisdomTree Investments
Considering the 90-day investment horizon Small Cap is expected to generate 5453.13 times less return on investment than WisdomTree Investments. But when comparing it to its historical volatility, Small Cap Premium is 970.91 times less risky than WisdomTree Investments. It trades about 0.08 of its potential returns per unit of risk. WisdomTree Investments is currently generating about 0.47 of returns per unit of risk over similar time horizon. If you would invest 0.00 in WisdomTree Investments on September 14, 2024 and sell it today you would earn a total of 0.00 from holding WisdomTree Investments or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 1.62% |
| Values | Daily Returns |
Small Cap Premium vs. WisdomTree Investments
Performance |
| Timeline |
| Small Cap Premium |
| WisdomTree Investments |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Small Cap and WisdomTree Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and WisdomTree Investments
The main advantage of trading using opposite Small Cap and WisdomTree Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, WisdomTree Investments 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 Investments will offset losses from the drop in WisdomTree Investments' long position.| Small Cap vs. RiverNorth Specialty Finance | Small Cap vs. Royce Micro Cap | Small Cap vs. First Trust Enhanced | Small Cap vs. Voya Global Advantage |
| WisdomTree Investments vs. Small Cap Premium | WisdomTree Investments vs. RCI Hospitality Holdings | WisdomTree Investments vs. Summit Hotel Properties | WisdomTree Investments vs. Nomura Holdings ADR |
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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