Correlation Between WisdomTree SmallCap and Matthews China

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

Diversification Opportunities for WisdomTree SmallCap and Matthews China

0.0

Correlation Coefficient

WisdomTree SmallCap  Matthews China

Pay attention - limited upside

The 3 months correlation between WisdomTree and Matthews is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree SmallCap Quality and Matthews China Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews China Discovery 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 Matthews China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews China Discovery has no effect on the direction of WisdomTree SmallCap i.e., WisdomTree SmallCap and Matthews China go up and down completely randomly.

Pair Corralation between WisdomTree SmallCap and Matthews China

If you would invest  2,666  in WisdomTree SmallCap Quality on October 24, 2024 and sell it today you would earn a total of  198.00  from holding WisdomTree SmallCap Quality or generate 7.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.67%
Values	Daily Returns

WisdomTree SmallCap Quality  vs.  Matthews China Discovery

WisdomTree SmallCap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree SmallCap Quality are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal primary indicators, WisdomTree SmallCap may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Matthews China Discovery

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with WisdomTree SmallCap and Matthews China

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

The idea behind WisdomTree SmallCap Quality and Matthews China Discovery 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.