Correlation Between WisdomTree International and Principal Small

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

By analyzing existing cross correlation between WisdomTree International Al and Principal Small Cap Multi Factor, you can compare the effects of market volatilities on WisdomTree International and Principal Small 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 International with a short position of Principal Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree International and Principal Small.

Diversification Opportunities for WisdomTree International and Principal Small

0.7

Correlation Coefficient

WisdomTree International  Principal Small

Poor diversification

The 3 months correlation between WisdomTree and Principal is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International Al and Principal Small Cap Multi Fact in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Small Cap and WisdomTree International 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 International Al are associated (or correlated) with Principal Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Small Cap has no effect on the direction of WisdomTree International i.e., WisdomTree International and Principal Small go up and down completely randomly.

Pair Corralation between WisdomTree International and Principal Small

Given the investment horizon of 90 days WisdomTree International Al is expected to generate 0.69 times more return on investment than Principal Small. However, WisdomTree International Al is 1.45 times less risky than Principal Small. It trades about 0.17 of its potential returns per unit of risk. Principal Small Cap Multi Factor is currently generating about 0.08 per unit of risk. If you would invest  4,583  in WisdomTree International Al on May 15, 2025 and sell it today you would earn a total of  356.00  from holding WisdomTree International Al or generate 7.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

WisdomTree International Al  vs.  Principal Small Cap Multi Fact

WisdomTree International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree International Al are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, WisdomTree International may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Principal Small Cap

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Small Cap Multi Factor are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Principal Small is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with WisdomTree International and Principal Small

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

The idea behind WisdomTree International Al and Principal Small Cap Multi Factor 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 AI Portfolio Prophet module to use AI to generate optimal portfolios and find profitable investment opportunities.