Correlation Between Vanguard Small and WisdomTree SmallCap
Can any of the company-specific risk be diversified away by investing in both Vanguard Small 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 Vanguard Small and WisdomTree SmallCap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Growth and WisdomTree SmallCap Quality, you can compare the effects of market volatilities on Vanguard Small 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 Vanguard Small with a short position of WisdomTree SmallCap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and WisdomTree SmallCap.
Diversification Opportunities for Vanguard Small and WisdomTree SmallCap
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and WisdomTree is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Growth and WisdomTree SmallCap Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree SmallCap 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 Growth 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 Vanguard Small i.e., Vanguard Small and WisdomTree SmallCap go up and down completely randomly.
Pair Corralation between Vanguard Small and WisdomTree SmallCap
Considering the 90-day investment horizon Vanguard Small Cap Growth is expected to generate 0.77 times more return on investment than WisdomTree SmallCap. However, Vanguard Small Cap Growth is 1.3 times less risky than WisdomTree SmallCap. It trades about 0.47 of its potential returns per unit of risk. WisdomTree SmallCap Quality is currently generating about 0.33 per unit of risk. If you would invest 26,684 in Vanguard Small Cap Growth on September 1, 2024 and sell it today you would earn a total of 3,483 from holding Vanguard Small Cap Growth or generate 13.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Vanguard Small Cap Growth vs. WisdomTree SmallCap Quality
Performance |
| Timeline |
| Vanguard Small Cap |
| WisdomTree SmallCap |
Vanguard Small and WisdomTree SmallCap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and WisdomTree SmallCap
The main advantage of trading using opposite Vanguard Small and WisdomTree SmallCap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small 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.| Vanguard Small vs. Vanguard Mid Cap Growth | Vanguard Small vs. Vanguard Small Cap Value | Vanguard Small vs. Vanguard Mid Cap Value | Vanguard Small vs. Vanguard Growth Index |
| WisdomTree SmallCap vs. iShares SP Mid Cap | WisdomTree SmallCap vs. iShares SP Small Cap | WisdomTree SmallCap vs. iShares SP Mid Cap | WisdomTree SmallCap vs. iShares SP 500 |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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