Correlation Between WisdomTree SmallCap and Professionally Managed

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

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

Diversification Opportunities for WisdomTree SmallCap and Professionally Managed

0.69

Correlation Coefficient

WisdomTree SmallCap  Professionally Managed

Poor diversification

The 3 months correlation between WisdomTree and Professionally is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree SmallCap Quality and Professionally Managed Portfol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Professionally Managed and WisdomTree SmallCap 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 SmallCap Quality are associated (or correlated) with Professionally Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Professionally Managed has no effect on the direction of WisdomTree SmallCap i.e., WisdomTree SmallCap and Professionally Managed go up and down completely randomly.

Pair Corralation between WisdomTree SmallCap and Professionally Managed

Given the investment horizon of 90 days WisdomTree SmallCap Quality is expected to under-perform the Professionally Managed. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree SmallCap Quality is 1.09 times less risky than Professionally Managed. The etf trades about -0.02 of its potential returns per unit of risk. The Professionally Managed Portfolios is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,257  in Professionally Managed Portfolios on August 29, 2025 and sell it today you would lose (18.00) from holding Professionally Managed Portfolios or give up 0.55% of portfolio value over 90 days.

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

WisdomTree SmallCap Quality  vs.  Professionally Managed Portfol

WisdomTree SmallCap

Risk-Adjusted Performance

Weakest

Over the last 90 days WisdomTree SmallCap Quality has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, WisdomTree SmallCap is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Professionally Managed

Risk-Adjusted Performance

Weakest

Over the last 90 days Professionally Managed Portfolios has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Professionally Managed 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 SmallCap and Professionally Managed

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

The idea behind WisdomTree SmallCap Quality and Professionally Managed Portfolios 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.