Correlation Between WisdomTree Total and WisdomTree SmallCap

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

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

Diversification Opportunities for WisdomTree Total and WisdomTree SmallCap

0.89

Correlation Coefficient

WisdomTree Total  WisdomTree SmallCap

Very poor diversification

The 3 months correlation between WisdomTree and WisdomTree is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Total Dividend and WisdomTree SmallCap Earnings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree SmallCap and WisdomTree Total 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 Total Dividend 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 WisdomTree Total i.e., WisdomTree Total and WisdomTree SmallCap go up and down completely randomly.

Pair Corralation between WisdomTree Total and WisdomTree SmallCap

Considering the 90-day investment horizon WisdomTree Total is expected to generate 1.21 times less return on investment than WisdomTree SmallCap. But when comparing it to its historical volatility, WisdomTree Total Dividend is 1.83 times less risky than WisdomTree SmallCap. It trades about 0.19 of its potential returns per unit of risk. WisdomTree SmallCap Earnings is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,784  in WisdomTree SmallCap Earnings on May 2, 2025 and sell it today you would earn a total of  425.00  from holding WisdomTree SmallCap Earnings or generate 8.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

WisdomTree Total Dividend  vs.  WisdomTree SmallCap Earnings

WisdomTree Total Dividend

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Total Dividend are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, WisdomTree Total may actually be approaching a critical reversion point that can send shares even higher in August 2025.

WisdomTree SmallCap

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree SmallCap Earnings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, WisdomTree SmallCap may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with WisdomTree Total and WisdomTree SmallCap

The main advantage of trading using opposite WisdomTree Total and WisdomTree SmallCap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Total 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 WisdomTree Total Dividend and WisdomTree SmallCap Earnings 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.