Correlation Between WisdomTree SmallCap and WisdomTree International
Can any of the company-specific risk be diversified away by investing in both WisdomTree SmallCap and WisdomTree 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 WisdomTree SmallCap and WisdomTree International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree SmallCap Dividend and WisdomTree International SmallCap, you can compare the effects of market volatilities on WisdomTree SmallCap and WisdomTree 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 WisdomTree SmallCap with a short position of WisdomTree International. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree SmallCap and WisdomTree International.
Diversification Opportunities for WisdomTree SmallCap and WisdomTree International
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between WisdomTree and WisdomTree is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree SmallCap Dividend and WisdomTree International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree International and WisdomTree SmallCap 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 SmallCap Dividend are associated (or correlated) with WisdomTree International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree International has no effect on the direction of WisdomTree SmallCap i.e., WisdomTree SmallCap and WisdomTree International go up and down completely randomly.
Pair Corralation between WisdomTree SmallCap and WisdomTree International
Considering the 90-day investment horizon WisdomTree SmallCap Dividend is expected to generate 1.67 times more return on investment than WisdomTree International. However, WisdomTree SmallCap is 1.67 times more volatile than WisdomTree International SmallCap. It trades about 0.12 of its potential returns per unit of risk. WisdomTree International SmallCap is currently generating about 0.19 per unit of risk. If you would invest 3,133 in WisdomTree SmallCap Dividend on June 6, 2025 and sell it today you would earn a total of 256.00 from holding WisdomTree SmallCap Dividend or generate 8.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree SmallCap Dividend vs. WisdomTree International Small
Performance |
| Timeline |
| WisdomTree SmallCap |
| WisdomTree International |
WisdomTree SmallCap and WisdomTree International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree SmallCap and WisdomTree International
The main advantage of trading using opposite WisdomTree SmallCap and WisdomTree International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree SmallCap position performs unexpectedly, WisdomTree 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 WisdomTree International will offset losses from the drop in WisdomTree International's long position.The idea behind WisdomTree SmallCap Dividend and WisdomTree International SmallCap pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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