Correlation Between OShares Small and WisdomTree Quality

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

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

Diversification Opportunities for OShares Small and WisdomTree Quality

0.64

Correlation Coefficient

OShares Small  WisdomTree Quality

Poor diversification

The 3 months correlation between OShares and WisdomTree is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding OShares Small Cap Quality and WisdomTree Quality Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Quality and OShares Small 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 OShares Small Cap Quality are associated (or correlated) with WisdomTree Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Quality has no effect on the direction of OShares Small i.e., OShares Small and WisdomTree Quality go up and down completely randomly.

Pair Corralation between OShares Small and WisdomTree Quality

Given the investment horizon of 90 days OShares Small is expected to generate 2.19 times less return on investment than WisdomTree Quality. In addition to that, OShares Small is 1.31 times more volatile than WisdomTree Quality Dividend. It trades about 0.06 of its total potential returns per unit of risk. WisdomTree Quality Dividend is currently generating about 0.18 per unit of volatility. If you would invest  7,821  in WisdomTree Quality Dividend on May 4, 2025 and sell it today you would earn a total of  607.00  from holding WisdomTree Quality Dividend or generate 7.76% return on investment over 90 days.

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

OShares Small Cap Quality  vs.  WisdomTree Quality Dividend

OShares Small Cap

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in OShares Small Cap Quality are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, OShares Small is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

WisdomTree Quality

Risk-Adjusted Performance

Good

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

Pair Trading with OShares Small and WisdomTree Quality

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

The idea behind OShares Small Cap Quality and WisdomTree Quality Dividend 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..