Correlation Between Vanguard Small and WisdomTree Emerging
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and WisdomTree Emerging 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 Vanguard Small and WisdomTree Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Index and WisdomTree Emerging Currency, you can compare the effects of market volatilities on Vanguard Small and WisdomTree Emerging 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 Vanguard Small with a short position of WisdomTree Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and WisdomTree Emerging.
Diversification Opportunities for Vanguard Small and WisdomTree Emerging
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vanguard and WisdomTree is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and WisdomTree Emerging Currency in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Emerging and Vanguard Small 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 Vanguard Small Cap Index are associated (or correlated) with WisdomTree Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Emerging has no effect on the direction of Vanguard Small i.e., Vanguard Small and WisdomTree Emerging go up and down completely randomly.
Pair Corralation between Vanguard Small and WisdomTree Emerging
Allowing for the 90-day total investment horizon Vanguard Small Cap Index is expected to generate 2.84 times more return on investment than WisdomTree Emerging. However, Vanguard Small is 2.84 times more volatile than WisdomTree Emerging Currency. It trades about 0.07 of its potential returns per unit of risk. WisdomTree Emerging Currency is currently generating about 0.05 per unit of risk. If you would invest 18,255 in Vanguard Small Cap Index on August 27, 2024 and sell it today you would earn a total of 7,518 from holding Vanguard Small Cap Index or generate 41.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. WisdomTree Emerging Currency
Performance |
| Timeline |
| Vanguard Small Cap |
| WisdomTree Emerging |
Vanguard Small and WisdomTree Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and WisdomTree Emerging
The main advantage of trading using opposite Vanguard Small and WisdomTree Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, WisdomTree Emerging 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 Emerging will offset losses from the drop in WisdomTree Emerging's long position.| Vanguard Small vs. Vanguard Mid Cap Index | Vanguard Small vs. Vanguard Small Cap Value | Vanguard Small vs. Vanguard FTSE Emerging | Vanguard Small vs. Vanguard Large Cap Index |
| WisdomTree Emerging vs. Invesco Emerging Markets | WisdomTree Emerging vs. PIMCO 15 Year | WisdomTree Emerging vs. iShares JP Morgan | WisdomTree Emerging vs. WisdomTree 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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