Correlation Between Vanguard Value and WisdomTree Dynamic

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

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

Diversification Opportunities for Vanguard Value and WisdomTree Dynamic

0.93

Correlation Coefficient

Vanguard Value  WisdomTree Dynamic

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 Value Factor and WisdomTree Dynamic Currency in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Dynamic and Vanguard Value 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 Value Factor are associated (or correlated) with WisdomTree Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Dynamic has no effect on the direction of Vanguard Value i.e., Vanguard Value and WisdomTree Dynamic go up and down completely randomly.

Pair Corralation between Vanguard Value and WisdomTree Dynamic

Given the investment horizon of 90 days Vanguard Value Factor is expected to generate 1.87 times more return on investment than WisdomTree Dynamic. However, Vanguard Value is 1.87 times more volatile than WisdomTree Dynamic Currency. It trades about 0.19 of its potential returns per unit of risk. WisdomTree Dynamic Currency is currently generating about 0.31 per unit of risk. If you would invest  10,664  in Vanguard Value Factor on April 25, 2025 and sell it today you would earn a total of  1,611  from holding Vanguard Value Factor or generate 15.11% return on investment over 90 days.

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

Vanguard Value Factor  vs.  WisdomTree Dynamic Currency

Vanguard Value Factor

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Value Factor are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Vanguard Value sustained solid returns over the last few months and may actually be approaching a breakup point.

WisdomTree Dynamic

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Dynamic Currency are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating essential indicators, WisdomTree Dynamic unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Value and WisdomTree Dynamic

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

The idea behind Vanguard Value Factor and WisdomTree Dynamic Currency 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.