Correlation Between WisdomTree SmallCap and ETF Series

Can any of the company-specific risk be diversified away by investing in both WisdomTree SmallCap and ETF Series 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 ETF Series 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 ETF Series Solutions, you can compare the effects of market volatilities on WisdomTree SmallCap and ETF Series 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 ETF Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree SmallCap and ETF Series.

Diversification Opportunities for WisdomTree SmallCap and ETF Series

-0.16

Correlation Coefficient

WisdomTree SmallCap  ETF Series

Good diversification

The 3 months correlation between WisdomTree and ETF is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree SmallCap Quality and ETF Series Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETF Series Solutions 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 ETF Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETF Series Solutions has no effect on the direction of WisdomTree SmallCap i.e., WisdomTree SmallCap and ETF Series go up and down completely randomly.

Pair Corralation between WisdomTree SmallCap and ETF Series

Given the investment horizon of 90 days WisdomTree SmallCap Quality is expected to under-perform the ETF Series. In addition to that, WisdomTree SmallCap is 1.61 times more volatile than ETF Series Solutions. It trades about -0.04 of its total potential returns per unit of risk. ETF Series Solutions is currently generating about 0.13 per unit of volatility. If you would invest  2,271  in ETF Series Solutions on September 4, 2025 and sell it today you would earn a total of  130.00  from holding ETF Series Solutions or generate 5.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

WisdomTree SmallCap Quality  vs.  ETF Series Solutions

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.

ETF Series Solutions

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in ETF Series Solutions are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ETF Series is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with WisdomTree SmallCap and ETF Series

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

The idea behind WisdomTree SmallCap Quality and ETF Series Solutions 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.