Correlation Between DoubleLine Shiller and WisdomTree Japan

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

By analyzing existing cross correlation between DoubleLine Shiller CAPE and WisdomTree Japan SmallCap, you can compare the effects of market volatilities on DoubleLine Shiller and WisdomTree Japan 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 DoubleLine Shiller with a short position of WisdomTree Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of DoubleLine Shiller and WisdomTree Japan.

Diversification Opportunities for DoubleLine Shiller and WisdomTree Japan

0.89

Correlation Coefficient

DoubleLine Shiller  WisdomTree Japan

Very poor diversification

The 3 months correlation between DoubleLine and WisdomTree is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding DoubleLine Shiller CAPE and WisdomTree Japan SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Japan SmallCap and DoubleLine Shiller 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 DoubleLine Shiller CAPE are associated (or correlated) with WisdomTree Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Japan SmallCap has no effect on the direction of DoubleLine Shiller i.e., DoubleLine Shiller and WisdomTree Japan go up and down completely randomly.

Pair Corralation between DoubleLine Shiller and WisdomTree Japan

Given the investment horizon of 90 days DoubleLine Shiller CAPE is expected to generate 0.94 times more return on investment than WisdomTree Japan. However, DoubleLine Shiller CAPE is 1.06 times less risky than WisdomTree Japan. It trades about 0.18 of its potential returns per unit of risk. WisdomTree Japan SmallCap is currently generating about 0.14 per unit of risk. If you would invest  2,925  in DoubleLine Shiller CAPE on April 23, 2025 and sell it today you would earn a total of  248.00  from holding DoubleLine Shiller CAPE or generate 8.48% return on investment over 90 days.

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

DoubleLine Shiller CAPE  vs.  WisdomTree Japan SmallCap

DoubleLine Shiller CAPE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DoubleLine Shiller CAPE are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, DoubleLine Shiller may actually be approaching a critical reversion point that can send shares even higher in August 2025.

WisdomTree Japan SmallCap

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Japan SmallCap are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting technical and fundamental indicators, WisdomTree Japan may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with DoubleLine Shiller and WisdomTree Japan

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

The idea behind DoubleLine Shiller CAPE and WisdomTree Japan SmallCap 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.