Correlation Between IShares Core and WisdomTree SmallCap

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

Diversification Opportunities for IShares Core and WisdomTree SmallCap

0.81

Correlation Coefficient

IShares Core  WisdomTree SmallCap

Very poor diversification

The 3 months correlation between IShares and WisdomTree is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Dividend and WisdomTree SmallCap Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree SmallCap and IShares Core 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 Core Dividend 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 Core i.e., IShares Core and WisdomTree SmallCap go up and down completely randomly.

Pair Corralation between IShares Core and WisdomTree SmallCap

Given the investment horizon of 90 days iShares Core Dividend is expected to under-perform the WisdomTree SmallCap. But the etf apears to be less risky and, when comparing its historical volatility, iShares Core Dividend is 1.53 times less risky than WisdomTree SmallCap. The etf trades about -0.1 of its potential returns per unit of risk. The WisdomTree SmallCap Dividend is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,592  in WisdomTree SmallCap Dividend on September 18, 2024 and sell it today you would earn a total of  2.00  from holding WisdomTree SmallCap Dividend or generate 0.06% return on investment over 90 days.

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

iShares Core Dividend  vs.  WisdomTree SmallCap Dividend

iShares Core Dividend

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core Dividend are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Core is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

WisdomTree SmallCap

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree SmallCap Dividend are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, WisdomTree SmallCap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Core and WisdomTree SmallCap

The main advantage of trading using opposite IShares Core and WisdomTree SmallCap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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.

The idea behind iShares Core Dividend and WisdomTree SmallCap Dividend 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.