Correlation Between WisdomTree Managed and WisdomTree Japan

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

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

Diversification Opportunities for WisdomTree Managed and WisdomTree Japan

0.86

Correlation Coefficient

WisdomTree Managed  WisdomTree Japan

Very poor diversification

The 3 months correlation between WisdomTree and WisdomTree is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Managed Futures 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 WisdomTree Managed 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 WisdomTree Managed Futures 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 WisdomTree Managed i.e., WisdomTree Managed and WisdomTree Japan go up and down completely randomly.

Pair Corralation between WisdomTree Managed and WisdomTree Japan

Given the investment horizon of 90 days WisdomTree Managed is expected to generate 3.59 times less return on investment than WisdomTree Japan. But when comparing it to its historical volatility, WisdomTree Managed Futures is 2.02 times less risky than WisdomTree Japan. It trades about 0.12 of its potential returns per unit of risk. WisdomTree Japan SmallCap is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  8,101  in WisdomTree Japan SmallCap on May 7, 2025 and sell it today you would earn a total of  893.00  from holding WisdomTree Japan SmallCap or generate 11.02% return on investment over 90 days.

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

WisdomTree Managed Futures  vs.  WisdomTree Japan SmallCap

WisdomTree Managed

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Managed Futures are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, WisdomTree Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

WisdomTree Japan SmallCap

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Japan SmallCap are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, WisdomTree Japan may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with WisdomTree Managed and WisdomTree Japan

The main advantage of trading using opposite WisdomTree Managed and WisdomTree Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Managed 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 WisdomTree Managed Futures 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.