Correlation Between SPDR SP and WisdomTree SmallCap

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

Diversification Opportunities for SPDR SP and WisdomTree SmallCap

-0.44

Correlation Coefficient

SPDR SP  WisdomTree SmallCap

Very good diversification

The 3 months correlation between SPDR and WisdomTree is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP International and WisdomTree SmallCap Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree SmallCap and SPDR 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 SPDR SP International 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 SPDR SP i.e., SPDR SP and WisdomTree SmallCap go up and down completely randomly.

Pair Corralation between SPDR SP and WisdomTree SmallCap

Considering the 90-day investment horizon SPDR SP International is expected to under-perform the WisdomTree SmallCap. But the etf apears to be less risky and, when comparing its historical volatility, SPDR SP International is 2.3 times less risky than WisdomTree SmallCap. The etf trades about -0.23 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  3,429  in WisdomTree SmallCap Dividend on September 28, 2024 and sell it today you would lose (1.00) from holding WisdomTree SmallCap Dividend or give up 0.03% of portfolio value over 90 days.

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

SPDR SP International  vs.  WisdomTree SmallCap Dividend

SPDR SP International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

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.

Pair Trading with SPDR SP and WisdomTree SmallCap

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

The idea behind SPDR SP International 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.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.