Correlation Between Microsectors Gold and WisdomTree SmallCap

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

By analyzing existing cross correlation between Microsectors Gold 3x and WisdomTree SmallCap Earnings, you can compare the effects of market volatilities on Microsectors Gold 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 Microsectors Gold with a short position of WisdomTree SmallCap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsectors Gold and WisdomTree SmallCap.

Diversification Opportunities for Microsectors Gold and WisdomTree SmallCap

-0.49

Correlation Coefficient

Microsectors Gold  WisdomTree SmallCap

Very good diversification

The 3 months correlation between Microsectors and WisdomTree is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Microsectors Gold 3x and WisdomTree SmallCap Earnings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree SmallCap and Microsectors Gold 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 Microsectors Gold 3x 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 Microsectors Gold i.e., Microsectors Gold and WisdomTree SmallCap go up and down completely randomly.

Pair Corralation between Microsectors Gold and WisdomTree SmallCap

Given the investment horizon of 90 days Microsectors Gold 3x is expected to under-perform the WisdomTree SmallCap. In addition to that, Microsectors Gold is 2.28 times more volatile than WisdomTree SmallCap Earnings. It trades about -0.01 of its total potential returns per unit of risk. WisdomTree SmallCap Earnings is currently generating about 0.1 per unit of volatility. If you would invest  5,009  in WisdomTree SmallCap Earnings on May 20, 2025 and sell it today you would earn a total of  377.00  from holding WisdomTree SmallCap Earnings or generate 7.53% return on investment over 90 days.

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

Microsectors Gold 3x  vs.  WisdomTree SmallCap Earnings

Microsectors Gold

Risk-Adjusted Performance

Weakest

Over the last 90 days Microsectors Gold 3x has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Microsectors Gold is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the 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 Microsectors Gold and WisdomTree SmallCap

The main advantage of trading using opposite Microsectors Gold and WisdomTree SmallCap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsectors Gold 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 Microsectors Gold 3x 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.