Correlation Between Vanguard Small and WisdomTree Short

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

By analyzing existing cross correlation between Vanguard Small Cap Index and WisdomTree Short Term Corporate, you can compare the effects of market volatilities on Vanguard Small and WisdomTree Short 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 Vanguard Small with a short position of WisdomTree Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and WisdomTree Short.

Diversification Opportunities for Vanguard Small and WisdomTree Short

-0.37

Correlation Coefficient

Vanguard Small  WisdomTree Short

Very good diversification

The 3 months correlation between Vanguard and WisdomTree is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and WisdomTree Short Term Corporat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Short Term and Vanguard Small 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 Vanguard Small Cap Index are associated (or correlated) with WisdomTree Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Short Term has no effect on the direction of Vanguard Small i.e., Vanguard Small and WisdomTree Short go up and down completely randomly.

Pair Corralation between Vanguard Small and WisdomTree Short

If you would invest  23,295  in Vanguard Small Cap Index on September 17, 2024 and sell it today you would earn a total of  2,031  from holding Vanguard Small Cap Index or generate 8.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Vanguard Small Cap Index  vs.  WisdomTree Short Term Corporat

Vanguard Small Cap

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Index are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Vanguard Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

WisdomTree Short Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Short Term Corporate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, WisdomTree Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vanguard Small and WisdomTree Short

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

The idea behind Vanguard Small Cap Index and WisdomTree Short Term Corporate 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.