Correlation Between WisdomTree SmallCap and IShares International

Can any of the company-specific risk be diversified away by investing in both WisdomTree SmallCap and IShares 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 IShares 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 iShares International Select, you can compare the effects of market volatilities on WisdomTree SmallCap and IShares 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 IShares International. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree SmallCap and IShares International.

Diversification Opportunities for WisdomTree SmallCap and IShares International

-0.53

Correlation Coefficient

WisdomTree SmallCap  IShares International

Excellent diversification

The 3 months correlation between WisdomTree and IShares is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree SmallCap Dividend and iShares International Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares 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 IShares International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares International has no effect on the direction of WisdomTree SmallCap i.e., WisdomTree SmallCap and IShares International go up and down completely randomly.

Pair Corralation between WisdomTree SmallCap and IShares International

Considering the 90-day investment horizon WisdomTree SmallCap Dividend is expected to generate 1.47 times more return on investment than IShares International. However, WisdomTree SmallCap is 1.47 times more volatile than iShares International Select. It trades about 0.04 of its potential returns per unit of risk. iShares International Select is currently generating about 0.03 per unit of risk. If you would invest  2,766  in WisdomTree SmallCap Dividend on September 28, 2024 and sell it today you would earn a total of  669.00  from holding WisdomTree SmallCap Dividend or generate 24.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

WisdomTree SmallCap Dividend  vs.  iShares International Select

WisdomTree SmallCap

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days WisdomTree SmallCap Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, WisdomTree SmallCap is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

iShares International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares International Select has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Pair Trading with WisdomTree SmallCap and IShares International

The main advantage of trading using opposite WisdomTree SmallCap and IShares International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree SmallCap position performs unexpectedly, IShares 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 IShares International will offset losses from the drop in IShares International's long position.

The idea behind WisdomTree SmallCap Dividend and iShares International Select 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.