Correlation Between WisdomTree Japan and WisdomTree International

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

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

Diversification Opportunities for WisdomTree Japan and WisdomTree International

0.95

Correlation Coefficient

WisdomTree Japan  WisdomTree International

Almost no diversification

The 3 months correlation between WisdomTree and WisdomTree is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Japan SmallCap and WisdomTree International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree International and WisdomTree Japan 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 Japan SmallCap are associated (or correlated) with WisdomTree International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree International has no effect on the direction of WisdomTree Japan i.e., WisdomTree Japan and WisdomTree International go up and down completely randomly.

Pair Corralation between WisdomTree Japan and WisdomTree International

Considering the 90-day investment horizon WisdomTree Japan is expected to generate 1.94 times less return on investment than WisdomTree International. In addition to that, WisdomTree Japan is 1.21 times more volatile than WisdomTree International SmallCap. It trades about 0.15 of its total potential returns per unit of risk. WisdomTree International SmallCap is currently generating about 0.35 per unit of volatility. If you would invest  6,762  in WisdomTree International SmallCap on April 26, 2025 and sell it today you would earn a total of  1,024  from holding WisdomTree International SmallCap or generate 15.14% return on investment over 90 days.

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

WisdomTree Japan SmallCap  vs.  WisdomTree International Small

WisdomTree Japan SmallCap

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Japan SmallCap are ranked lower than 11 (%) 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.

WisdomTree International

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree International SmallCap are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating essential indicators, WisdomTree International unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WisdomTree Japan and WisdomTree International

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

The idea behind WisdomTree Japan SmallCap and WisdomTree International 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.