Correlation Between IShares SP and WisdomTree SmallCap
Can any of the company-specific risk be diversified away by investing in both IShares SP and WisdomTree SmallCap 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 IShares SP and WisdomTree SmallCap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares SP Small Cap and WisdomTree SmallCap Earnings, you can compare the effects of market volatilities on IShares SP and WisdomTree SmallCap 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 IShares SP with a short position of WisdomTree SmallCap. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and WisdomTree SmallCap.
Diversification Opportunities for IShares SP and WisdomTree SmallCap
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and WisdomTree is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP Small Cap and WisdomTree SmallCap Earnings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree SmallCap and IShares SP 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 iShares SP Small Cap are associated (or correlated) with WisdomTree SmallCap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree SmallCap has no effect on the direction of IShares SP i.e., IShares SP and WisdomTree SmallCap go up and down completely randomly.
Pair Corralation between IShares SP and WisdomTree SmallCap
Considering the 90-day investment horizon iShares SP Small Cap is expected to generate 1.11 times more return on investment than WisdomTree SmallCap. However, IShares SP is 1.11 times more volatile than WisdomTree SmallCap Earnings. It trades about -0.02 of its potential returns per unit of risk. WisdomTree SmallCap Earnings is currently generating about -0.07 per unit of risk. If you would invest 9,834 in iShares SP Small Cap on March 19, 2025 and sell it today you would lose (60.00) from holding iShares SP Small Cap or give up 0.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares SP Small Cap vs. WisdomTree SmallCap Earnings
Performance |
| Timeline |
| iShares SP Small |
| WisdomTree SmallCap |
IShares SP and WisdomTree SmallCap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SP and WisdomTree SmallCap
The main advantage of trading using opposite IShares SP and WisdomTree SmallCap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP position performs unexpectedly, WisdomTree SmallCap 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 SmallCap will offset losses from the drop in WisdomTree SmallCap's long position.| IShares SP vs. iShares SP Small Cap | IShares SP vs. iShares SP Mid Cap | IShares SP vs. iShares SP Mid Cap | IShares SP vs. iShares SP 500 |
| WisdomTree SmallCap vs. WisdomTree MidCap Earnings | WisdomTree SmallCap vs. WisdomTree Earnings 500 | WisdomTree SmallCap vs. Invesco SP SmallCap | WisdomTree SmallCap vs. Invesco FTSE RAFI |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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