Correlation Between Wilshire International and Small Company
Can any of the company-specific risk be diversified away by investing in both Wilshire International 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 International 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 International Equity and Small Pany Growth, you can compare the effects of market volatilities on Wilshire International 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 International with a short position of Small Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wilshire International and Small Company.
Diversification Opportunities for Wilshire International and Small Company
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Wilshire and Small is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Wilshire International Equity and Small Pany Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Pany Growth and Wilshire International 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 International Equity 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 Growth has no effect on the direction of Wilshire International i.e., Wilshire International and Small Company go up and down completely randomly.
Pair Corralation between Wilshire International and Small Company
Assuming the 90 days horizon Wilshire International Equity is expected to generate 0.68 times more return on investment than Small Company. However, Wilshire International Equity is 1.47 times less risky than Small Company. It trades about 0.21 of its potential returns per unit of risk. Small Pany Growth is currently generating about 0.14 per unit of risk. If you would invest 999.00 in Wilshire International Equity on October 26, 2024 and sell it today you would earn a total of 30.00 from holding Wilshire International Equity or generate 3.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
Wilshire International Equity vs. Small Pany Growth
Performance |
| Timeline |
| Wilshire International |
| Small Pany Growth |
Wilshire International and Small Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wilshire International and Small Company
The main advantage of trading using opposite Wilshire International and Small Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wilshire International 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 International vs. Cref Money Market | Wilshire International vs. Elfun Government Money | Wilshire International vs. Edward Jones Money | Wilshire International vs. Blackrock Exchange Portfolio |
| Small Company vs. Small Pany Value | Small Company vs. Large Pany Value | Small Company vs. Wilshire Large | Small Company vs. Small 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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