Correlation Between Virtus Newfleet and WisdomTree Japan

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

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

Diversification Opportunities for Virtus Newfleet and WisdomTree Japan

0.87

Correlation Coefficient

Virtus Newfleet  WisdomTree Japan

Very poor diversification

The 3 months correlation between Virtus and WisdomTree is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Newfleet ABSMBS and WisdomTree Japan SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Japan SmallCap and Virtus Newfleet 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 Virtus Newfleet ABSMBS are associated (or correlated) with WisdomTree Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Japan SmallCap has no effect on the direction of Virtus Newfleet i.e., Virtus Newfleet and WisdomTree Japan go up and down completely randomly.

Pair Corralation between Virtus Newfleet and WisdomTree Japan

Given the investment horizon of 90 days Virtus Newfleet is expected to generate 3.83 times less return on investment than WisdomTree Japan. But when comparing it to its historical volatility, Virtus Newfleet ABSMBS is 5.68 times less risky than WisdomTree Japan. It trades about 0.17 of its potential returns per unit of risk. WisdomTree Japan SmallCap is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  8,160  in WisdomTree Japan SmallCap on April 30, 2025 and sell it today you would earn a total of  483.00  from holding WisdomTree Japan SmallCap or generate 5.92% return on investment over 90 days.

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

Virtus Newfleet ABSMBS  vs.  WisdomTree Japan SmallCap

Virtus Newfleet ABSMBS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Newfleet ABSMBS are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Virtus Newfleet is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

WisdomTree Japan SmallCap

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Japan SmallCap are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady technical and fundamental indicators, WisdomTree Japan is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Virtus Newfleet and WisdomTree Japan

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

The idea behind Virtus Newfleet ABSMBS and WisdomTree Japan SmallCap 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.