Correlation Between Vanguard Small and WisdomTree MidCap
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and WisdomTree MidCap 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 MidCap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Value and WisdomTree MidCap Earnings, you can compare the effects of market volatilities on Vanguard Small and WisdomTree MidCap 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 MidCap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and WisdomTree MidCap.
Diversification Opportunities for Vanguard Small and WisdomTree MidCap
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and WisdomTree is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and WisdomTree MidCap Earnings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree MidCap 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 Value are associated (or correlated) with WisdomTree MidCap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree MidCap has no effect on the direction of Vanguard Small i.e., Vanguard Small and WisdomTree MidCap go up and down completely randomly.
Pair Corralation between Vanguard Small and WisdomTree MidCap
Considering the 90-day investment horizon Vanguard Small is expected to generate 1.27 times less return on investment than WisdomTree MidCap. But when comparing it to its historical volatility, Vanguard Small Cap Value is 1.07 times less risky than WisdomTree MidCap. It trades about 0.05 of its potential returns per unit of risk. WisdomTree MidCap Earnings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 6,242 in WisdomTree MidCap Earnings on October 26, 2024 and sell it today you would earn a total of 256.00 from holding WisdomTree MidCap Earnings or generate 4.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Value vs. WisdomTree MidCap Earnings
Performance |
| Timeline |
| Vanguard Small Cap |
| WisdomTree MidCap |
Vanguard Small and WisdomTree MidCap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and WisdomTree MidCap
The main advantage of trading using opposite Vanguard Small and WisdomTree MidCap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, WisdomTree MidCap 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 MidCap will offset losses from the drop in WisdomTree MidCap's long position.| Vanguard Small vs. Vanguard Mid Cap Value | Vanguard Small vs. Vanguard Small Cap Growth | Vanguard Small vs. Vanguard Value Index | Vanguard Small vs. Vanguard Small Cap Index |
| WisdomTree MidCap vs. WisdomTree SmallCap Earnings | WisdomTree MidCap vs. WisdomTree Earnings 500 | WisdomTree MidCap vs. WisdomTree MidCap Dividend | WisdomTree MidCap vs. NXG NextGen Infrastructure |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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