Correlation Between Vanguard Small and WisdomTree Global

Can any of the company-specific risk be diversified away by investing in both Vanguard 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 Vanguard 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 Vanguard Small Cap Growth and WisdomTree Global ex US, you can compare the effects of market volatilities on Vanguard 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 Vanguard Small with a short position of WisdomTree Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and WisdomTree Global.

Diversification Opportunities for Vanguard Small and WisdomTree Global

0.94

Correlation Coefficient

Vanguard Small  WisdomTree Global

Almost no diversification

The 3 months correlation between Vanguard and WisdomTree is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Growth and WisdomTree Global ex US in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Global 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 Growth 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 has no effect on the direction of Vanguard Small i.e., Vanguard Small and WisdomTree Global go up and down completely randomly.

Pair Corralation between Vanguard Small and WisdomTree Global

Considering the 90-day investment horizon Vanguard Small Cap Growth is expected to generate 1.21 times more return on investment than WisdomTree Global. However, Vanguard Small is 1.21 times more volatile than WisdomTree Global ex US. It trades about 0.16 of its potential returns per unit of risk. WisdomTree Global ex US is currently generating about 0.07 per unit of risk. If you would invest  25,579  in Vanguard Small Cap Growth on May 2, 2025 and sell it today you would earn a total of  2,660  from holding Vanguard Small Cap Growth or generate 10.4% 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 Growth  vs.  WisdomTree Global ex US

Vanguard Small Cap

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Growth are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain fundamental drivers, Vanguard Small may actually be approaching a critical reversion point that can send shares even higher in August 2025.

WisdomTree Global

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Global ex US are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, WisdomTree Global is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Vanguard Small and WisdomTree Global

The main advantage of trading using opposite Vanguard Small and WisdomTree Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 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 Vanguard Small Cap Growth and WisdomTree Global ex US 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.