Correlation Between Wilshire 5000 and Small Company
Can any of the company-specific risk be diversified away by investing in both Wilshire 5000 and Small Company 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 Wilshire 5000 and Small Company into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wilshire 5000 Index and Small Pany Value, you can compare the effects of market volatilities on Wilshire 5000 and Small Company 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 Wilshire 5000 with a short position of Small Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wilshire 5000 and Small Company.
Diversification Opportunities for Wilshire 5000 and Small Company
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wilshire and Small is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Wilshire 5000 Index and Small Pany Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Pany Value and Wilshire 5000 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 Wilshire 5000 Index are associated (or correlated) with Small Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Pany Value has no effect on the direction of Wilshire 5000 i.e., Wilshire 5000 and Small Company go up and down completely randomly.
Pair Corralation between Wilshire 5000 and Small Company
Assuming the 90 days horizon Wilshire 5000 is expected to generate 1.23 times less return on investment than Small Company. But when comparing it to its historical volatility, Wilshire 5000 Index is 1.21 times less risky than Small Company. It trades about 0.1 of its potential returns per unit of risk. Small Pany Value is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,643 in Small Pany Value on October 26, 2024 and sell it today you would earn a total of 52.00 from holding Small Pany Value or generate 1.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wilshire 5000 Index vs. Small Pany Value
Performance |
| Timeline |
| Wilshire 5000 Index |
| Small Pany Value |
Wilshire 5000 and Small Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wilshire 5000 and Small Company
The main advantage of trading using opposite Wilshire 5000 and Small Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wilshire 5000 position performs unexpectedly, Small Company 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 Company will offset losses from the drop in Small Company's long position.| Wilshire 5000 vs. Wilshire 5000 Index | Wilshire 5000 vs. Schwab Total Stock | Wilshire 5000 vs. Vanguard Russell 3000 | Wilshire 5000 vs. iShares Russell 3000 |
| Small Company vs. Small Pany Growth | Small Company vs. Large Pany Value | Small Company vs. Small Pany Value | Small Company vs. Large Pany Growth |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
Other Complementary Tools
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges |