Correlation Between Small Company and Wilshire International
Can any of the company-specific risk be diversified away by investing in both Small Company and Wilshire International 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 Small Company and Wilshire International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Pany Value and Wilshire International Equity, you can compare the effects of market volatilities on Small Company and Wilshire International 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 Small Company with a short position of Wilshire International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Company and Wilshire International.
Diversification Opportunities for Small Company and Wilshire International
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Small and Wilshire is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Small Pany Value and Wilshire International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilshire International and Small Company 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 Small Pany Value are associated (or correlated) with Wilshire International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilshire International has no effect on the direction of Small Company i.e., Small Company and Wilshire International go up and down completely randomly.
Pair Corralation between Small Company and Wilshire International
Assuming the 90 days horizon Small Company is expected to generate 1.37 times less return on investment than Wilshire International. In addition to that, Small Company is 1.49 times more volatile than Wilshire International Equity. It trades about 0.11 of its total potential returns per unit of risk. Wilshire International Equity is currently generating about 0.21 per unit of volatility. If you would invest 1,018 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 2.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 94.74% |
| Values | Daily Returns |
Small Pany Value vs. Wilshire International Equity
Performance |
| Timeline |
| Small Pany Value |
| Wilshire International |
Small Company and Wilshire International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Company and Wilshire International
The main advantage of trading using opposite Small Company and Wilshire International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Company position performs unexpectedly, Wilshire International 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 Wilshire International will offset losses from the drop in Wilshire International's long position.| Small Company vs. Small Pany Growth | Small Company vs. Large Pany Value | Small Company vs. Small Pany Value | Small Company vs. Large Pany Growth |
| Wilshire International vs. Large Pany Value | Wilshire International vs. Wilshire Large | Wilshire International vs. Small Pany Growth | Wilshire International vs. Small Pany Value |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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