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