Correlation Between Dimensional ETF and WisdomTree Japan

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

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

Diversification Opportunities for Dimensional ETF and WisdomTree Japan

0.84

Correlation Coefficient

Dimensional ETF  WisdomTree Japan

Very poor diversification

The 3 months correlation between Dimensional and WisdomTree is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional ETF Trust and WisdomTree Japan Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Japan Hedged and Dimensional ETF 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 Dimensional ETF Trust 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 Hedged has no effect on the direction of Dimensional ETF i.e., Dimensional ETF and WisdomTree Japan go up and down completely randomly.

Pair Corralation between Dimensional ETF and WisdomTree Japan

Given the investment horizon of 90 days Dimensional ETF Trust is expected to generate 0.87 times more return on investment than WisdomTree Japan. However, Dimensional ETF Trust is 1.14 times less risky than WisdomTree Japan. It trades about 0.3 of its potential returns per unit of risk. WisdomTree Japan Hedged is currently generating about 0.14 per unit of risk. If you would invest  2,674  in Dimensional ETF Trust on April 28, 2025 and sell it today you would earn a total of  409.00  from holding Dimensional ETF Trust or generate 15.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	76.19%
Values	Daily Returns

Dimensional ETF Trust  vs.  WisdomTree Japan Hedged

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 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Dimensional ETF showed solid returns over the last few months and may actually be approaching a breakup point.

WisdomTree Japan Hedged

Risk-Adjusted Performance

OK

Over the last 90 days WisdomTree Japan Hedged has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively unsteady forward-looking indicators, WisdomTree Japan may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Dimensional ETF and WisdomTree Japan

The main advantage of trading using opposite Dimensional ETF and WisdomTree Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional ETF 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 Dimensional ETF Trust and WisdomTree Japan Hedged 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.