Correlation Between Vanguard Small and WisdomTree Issuer

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

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

Diversification Opportunities for Vanguard Small and WisdomTree Issuer

0.93

Correlation Coefficient

Vanguard Small  WisdomTree Issuer

Almost no diversification

The 3 months correlation between Vanguard and WisdomTree is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and WisdomTree Issuer ICAV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Issuer ICAV and Vanguard 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 Vanguard Small Cap Index are associated (or correlated) with WisdomTree Issuer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Issuer ICAV has no effect on the direction of Vanguard Small i.e., Vanguard Small and WisdomTree Issuer go up and down completely randomly.

Pair Corralation between Vanguard Small and WisdomTree Issuer

Allowing for the 90-day total investment horizon Vanguard Small is expected to generate 1.35 times less return on investment than WisdomTree Issuer. But when comparing it to its historical volatility, Vanguard Small Cap Index is 1.59 times less risky than WisdomTree Issuer. It trades about 0.23 of its potential returns per unit of risk. WisdomTree Issuer ICAV is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,519  in WisdomTree Issuer ICAV on April 26, 2025 and sell it today you would earn a total of  516.00  from holding WisdomTree Issuer ICAV or generate 20.48% return on investment over 90 days.

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

Vanguard Small Cap Index  vs.  WisdomTree Issuer ICAV

Vanguard Small Cap

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Index are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Vanguard Small sustained solid returns over the last few months and may actually be approaching a breakup point.

WisdomTree Issuer ICAV

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Issuer ICAV are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, WisdomTree Issuer reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Small and WisdomTree Issuer

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

The idea behind Vanguard Small Cap Index and WisdomTree Issuer ICAV 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.