Correlation Between Principal Small and WisdomTree Global

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

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

Diversification Opportunities for Principal Small and WisdomTree Global

0.91

Correlation Coefficient

Principal Small  WisdomTree Global

Almost no diversification

The 3 months correlation between Principal and WisdomTree is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Principal Small Cap Multi Fact and WisdomTree Global High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Global High and Principal 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 Principal Small Cap Multi Factor are associated (or correlated) with WisdomTree Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Global High has no effect on the direction of Principal Small i.e., Principal Small and WisdomTree Global go up and down completely randomly.

Pair Corralation between Principal Small and WisdomTree Global

Considering the 90-day investment horizon Principal Small Cap Multi Factor is expected to generate 1.93 times more return on investment than WisdomTree Global. However, Principal Small is 1.93 times more volatile than WisdomTree Global High. It trades about 0.17 of its potential returns per unit of risk. WisdomTree Global High is currently generating about 0.19 per unit of risk. If you would invest  4,757  in Principal Small Cap Multi Factor on April 30, 2025 and sell it today you would earn a total of  581.00  from holding Principal Small Cap Multi Factor or generate 12.21% return on investment over 90 days.

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

Principal Small Cap Multi Fact  vs.  WisdomTree Global High

Principal Small Cap

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Small Cap Multi Factor are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Principal Small may actually be approaching a critical reversion point that can send shares even higher in August 2025.

WisdomTree Global High

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Global High are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical and fundamental indicators, WisdomTree Global may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Principal Small and WisdomTree Global

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

The idea behind Principal Small Cap Multi Factor and WisdomTree Global High 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.