Correlation Between Dimensional International and WisdomTree SmallCap

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

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

Diversification Opportunities for Dimensional International and WisdomTree SmallCap

0.84

Correlation Coefficient

Dimensional International  WisdomTree SmallCap

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 International High and WisdomTree SmallCap Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree SmallCap and Dimensional International 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 International High are associated (or correlated) with WisdomTree SmallCap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree SmallCap has no effect on the direction of Dimensional International i.e., Dimensional International and WisdomTree SmallCap go up and down completely randomly.

Pair Corralation between Dimensional International and WisdomTree SmallCap

Given the investment horizon of 90 days Dimensional International is expected to generate 2.82 times less return on investment than WisdomTree SmallCap. But when comparing it to its historical volatility, Dimensional International High is 1.57 times less risky than WisdomTree SmallCap. It trades about 0.08 of its potential returns per unit of risk. WisdomTree SmallCap Quality is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,575  in WisdomTree SmallCap Quality on May 27, 2025 and sell it today you would earn a total of  258.50  from holding WisdomTree SmallCap Quality or generate 10.04% return on investment over 90 days.

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

Dimensional International High  vs.  WisdomTree SmallCap Quality

Dimensional International

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional International High are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical indicators, Dimensional International is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

WisdomTree SmallCap

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree SmallCap Quality are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile primary indicators, WisdomTree SmallCap may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Dimensional International and WisdomTree SmallCap

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

The idea behind Dimensional International High and WisdomTree SmallCap Quality 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.