Correlation Between WisdomTree SmallCap and Dimensional ETF

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

By analyzing existing cross correlation between WisdomTree SmallCap Quality and Dimensional ETF Trust, you can compare the effects of market volatilities on WisdomTree SmallCap and Dimensional ETF 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 Dimensional ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree SmallCap and Dimensional ETF.

Diversification Opportunities for WisdomTree SmallCap and Dimensional ETF

-0.74

Correlation Coefficient

WisdomTree SmallCap  Dimensional ETF

Pay attention - limited upside

The 3 months correlation between WisdomTree and Dimensional is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree SmallCap Quality and Dimensional ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional ETF Trust 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 Quality are associated (or correlated) with Dimensional ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional ETF Trust has no effect on the direction of WisdomTree SmallCap i.e., WisdomTree SmallCap and Dimensional ETF go up and down completely randomly.

Pair Corralation between WisdomTree SmallCap and Dimensional ETF

Given the investment horizon of 90 days WisdomTree SmallCap Quality is expected to under-perform the Dimensional ETF. In addition to that, WisdomTree SmallCap is 1.22 times more volatile than Dimensional ETF Trust. It trades about -0.16 of its total potential returns per unit of risk. Dimensional ETF Trust is currently generating about 0.22 per unit of volatility. If you would invest  2,651  in Dimensional ETF Trust on December 24, 2024 and sell it today you would earn a total of  328.00  from holding Dimensional ETF Trust or generate 12.37% return on investment over 90 days.

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

WisdomTree SmallCap Quality  vs.  Dimensional ETF Trust

WisdomTree SmallCap

Risk-Adjusted Performance

Very Weak

Over the last 90 days WisdomTree SmallCap Quality has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Etf's primary indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

Dimensional ETF Trust

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional ETF Trust are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Dimensional ETF may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with WisdomTree SmallCap and Dimensional ETF

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

The idea behind WisdomTree SmallCap Quality and Dimensional ETF Trust 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.