Correlation Between TCW Compounders and WisdomTree SmallCap

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

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

Diversification Opportunities for TCW Compounders and WisdomTree SmallCap

-0.13

Correlation Coefficient

TCW Compounders  WisdomTree SmallCap

Good diversification

The 3 months correlation between TCW and WisdomTree is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding TCW Compounders ETF and WisdomTree SmallCap Earnings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree SmallCap and TCW Compounders 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 TCW Compounders ETF 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 TCW Compounders i.e., TCW Compounders and WisdomTree SmallCap go up and down completely randomly.

Pair Corralation between TCW Compounders and WisdomTree SmallCap

Considering the 90-day investment horizon TCW Compounders ETF is expected to under-perform the WisdomTree SmallCap. But the etf apears to be less risky and, when comparing its historical volatility, TCW Compounders ETF is 1.5 times less risky than WisdomTree SmallCap. The etf trades about -0.13 of its potential returns per unit of risk. The WisdomTree SmallCap Earnings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  5,009  in WisdomTree SmallCap Earnings on May 20, 2025 and sell it today you would earn a total of  371.00  from holding WisdomTree SmallCap Earnings or generate 7.41% return on investment over 90 days.

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

TCW Compounders ETF  vs.  WisdomTree SmallCap Earnings

TCW Compounders ETF

Risk-Adjusted Performance

Weakest

Over the last 90 days TCW Compounders ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

WisdomTree SmallCap

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree SmallCap Earnings are ranked lower than 7 (%) 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 September 2025.

Pair Trading with TCW Compounders and WisdomTree SmallCap

The main advantage of trading using opposite TCW Compounders and WisdomTree SmallCap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TCW Compounders 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 TCW Compounders ETF 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.

Check out your portfolio center.

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.