Correlation Between Vanguard Mid and WisdomTree Multifactor

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

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

Diversification Opportunities for Vanguard Mid and WisdomTree Multifactor

0.48

Correlation Coefficient

Vanguard Mid  WisdomTree Multifactor

Very weak diversification

The 3 months correlation between Vanguard and WisdomTree is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Index and WisdomTree Multifactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Multifactor and Vanguard Mid 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 Mid Cap Index are associated (or correlated) with WisdomTree Multifactor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Multifactor has no effect on the direction of Vanguard Mid i.e., Vanguard Mid and WisdomTree Multifactor go up and down completely randomly.

Pair Corralation between Vanguard Mid and WisdomTree Multifactor

Allowing for the 90-day total investment horizon Vanguard Mid Cap Index is expected to generate 1.2 times more return on investment than WisdomTree Multifactor. However, Vanguard Mid is 1.2 times more volatile than WisdomTree Multifactor. It trades about 0.03 of its potential returns per unit of risk. WisdomTree Multifactor is currently generating about -0.03 per unit of risk. If you would invest  28,895  in Vanguard Mid Cap Index on September 6, 2025 and sell it today you would earn a total of  326.00  from holding Vanguard Mid Cap Index or generate 1.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Vanguard Mid Cap Index  vs.  WisdomTree Multifactor

Vanguard Mid Cap

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Index are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard Mid is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

WisdomTree Multifactor

Risk-Adjusted Performance

Weakest

Over the last 90 days WisdomTree Multifactor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, WisdomTree Multifactor is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vanguard Mid and WisdomTree Multifactor

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

The idea behind Vanguard Mid Cap Index and WisdomTree Multifactor 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.