Correlation Between Dow Jones and WisdomTree International
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and WisdomTree International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and WisdomTree International SmallCap, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of WisdomTree International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and WisdomTree International.
Diversification Opportunities for Dow Jones and WisdomTree International
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and WisdomTree is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and WisdomTree International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree International and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and WisdomTree International go up and down completely randomly.
Pair Corralation between Dow Jones and WisdomTree International
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.31 times less return on investment than WisdomTree International. In addition to that, Dow Jones is 1.16 times more volatile than WisdomTree International SmallCap. It trades about 0.23 of its total potential returns per unit of risk. WisdomTree International SmallCap is currently generating about 0.34 per unit of volatility. If you would invest 6,708 in WisdomTree International SmallCap on April 25, 2025 and sell it today you would earn a total of 1,028 from holding WisdomTree International SmallCap or generate 15.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. WisdomTree International Small
Performance |
| Timeline |
Dow Jones and WisdomTree International Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
WisdomTree International SmallCap
Pair trading matchups for WisdomTree International
Pair Trading with Dow Jones and WisdomTree International
The main advantage of trading using opposite Dow Jones and WisdomTree International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Hafnia Limited | Dow Jones vs. Guess Inc | Dow Jones vs. VF Corporation | Dow Jones vs. Canada Goose Holdings |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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