Correlation Between SPDR SP and WisdomTree SmallCap
Can any of the company-specific risk be diversified away by investing in both SPDR SP 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 SPDR SP and WisdomTree SmallCap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP 600 and WisdomTree SmallCap Dividend, you can compare the effects of market volatilities on SPDR SP 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 SPDR SP with a short position of WisdomTree SmallCap. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and WisdomTree SmallCap.
Diversification Opportunities for SPDR SP and WisdomTree SmallCap
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between SPDR and WisdomTree is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 600 and WisdomTree SmallCap Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree SmallCap and SPDR SP 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 SPDR SP 600 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 SPDR SP i.e., SPDR SP and WisdomTree SmallCap go up and down completely randomly.
Pair Corralation between SPDR SP and WisdomTree SmallCap
Given the investment horizon of 90 days SPDR SP is expected to generate 1.18 times less return on investment than WisdomTree SmallCap. In addition to that, SPDR SP is 1.06 times more volatile than WisdomTree SmallCap Dividend. It trades about 0.07 of its total potential returns per unit of risk. WisdomTree SmallCap Dividend is currently generating about 0.09 per unit of volatility. If you would invest 3,067 in WisdomTree SmallCap Dividend on August 27, 2024 and sell it today you would earn a total of 659.00 from holding WisdomTree SmallCap Dividend or generate 21.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP 600 vs. WisdomTree SmallCap Dividend
Performance |
| Timeline |
| SPDR SP 600 |
| WisdomTree SmallCap |
SPDR SP and WisdomTree SmallCap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and WisdomTree SmallCap
The main advantage of trading using opposite SPDR SP and WisdomTree SmallCap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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.| SPDR SP vs. Dimensional ETF Trust | SPDR SP vs. Vanguard Small Cap Index | SPDR SP vs. First Trust Multi Manager | SPDR SP vs. Vanguard SP Small Cap |
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.
Other Complementary Tools
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |