Correlation Between WisdomTree Japan and Foundry Partners

Can any of the company-specific risk be diversified away by investing in both WisdomTree Japan and Foundry Partners 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 Japan and Foundry Partners into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WisdomTree Japan SmallCap and Foundry Partners Fundamental, you can compare the effects of market volatilities on WisdomTree Japan and Foundry Partners 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 Japan with a short position of Foundry Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Japan and Foundry Partners.

Diversification Opportunities for WisdomTree Japan and Foundry Partners

0.1

Correlation Coefficient

WisdomTree Japan  Foundry Partners

Average diversification

The 3 months correlation between WisdomTree and Foundry is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Japan SmallCap and Foundry Partners Fundamental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foundry Partners Fun and WisdomTree Japan 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 Japan SmallCap are associated (or correlated) with Foundry Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foundry Partners Fun has no effect on the direction of WisdomTree Japan i.e., WisdomTree Japan and Foundry Partners go up and down completely randomly.

Pair Corralation between WisdomTree Japan and Foundry Partners

Considering the 90-day investment horizon WisdomTree Japan SmallCap is expected to generate 0.27 times more return on investment than Foundry Partners. However, WisdomTree Japan SmallCap is 3.69 times less risky than Foundry Partners. It trades about 0.01 of its potential returns per unit of risk. Foundry Partners Fundamental is currently generating about -0.17 per unit of risk. If you would invest  7,729  in WisdomTree Japan SmallCap on December 5, 2024 and sell it today you would earn a total of  35.00  from holding WisdomTree Japan SmallCap or generate 0.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

WisdomTree Japan SmallCap  vs.  Foundry Partners Fundamental

WisdomTree Japan SmallCap

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Japan SmallCap are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady technical and fundamental indicators, WisdomTree Japan is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Foundry Partners Fun

Risk-Adjusted Performance

Very Weak

Over the last 90 days Foundry Partners Fundamental has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with WisdomTree Japan and Foundry Partners

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

The idea behind WisdomTree Japan SmallCap and Foundry Partners Fundamental 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.