Correlation Between WisdomTree SmallCap and High-yield Municipal
Can any of the company-specific risk be diversified away by investing in both WisdomTree SmallCap and High-yield Municipal 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 SmallCap and High-yield Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree SmallCap Quality and High Yield Municipal Fund, you can compare the effects of market volatilities on WisdomTree SmallCap and High-yield Municipal 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 SmallCap with a short position of High-yield Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree SmallCap and High-yield Municipal.
Diversification Opportunities for WisdomTree SmallCap and High-yield Municipal
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WisdomTree and High-yield is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree SmallCap Quality and High Yield Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Municipal and WisdomTree SmallCap 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 SmallCap Quality are associated (or correlated) with High-yield Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Yield Municipal has no effect on the direction of WisdomTree SmallCap i.e., WisdomTree SmallCap and High-yield Municipal go up and down completely randomly.
Pair Corralation between WisdomTree SmallCap and High-yield Municipal
Given the investment horizon of 90 days WisdomTree SmallCap Quality is expected to generate 4.35 times more return on investment than High-yield Municipal. However, WisdomTree SmallCap is 4.35 times more volatile than High Yield Municipal Fund. It trades about 0.07 of its potential returns per unit of risk. High Yield Municipal Fund is currently generating about 0.02 per unit of risk. If you would invest 4,677 in WisdomTree SmallCap Quality on February 28, 2024 and sell it today you would earn a total of 170.00 from holding WisdomTree SmallCap Quality or generate 3.63% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
WisdomTree SmallCap Quality vs. High Yield Municipal Fund
Performance |
Timeline |
WisdomTree SmallCap |
High Yield Municipal |
WisdomTree SmallCap and High-yield Municipal Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with WisdomTree SmallCap and High-yield Municipal
The main advantage of trading using opposite WisdomTree SmallCap and High-yield Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree SmallCap position performs unexpectedly, High-yield Municipal 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 High-yield Municipal will offset losses from the drop in High-yield Municipal's long position.WisdomTree SmallCap vs. Vanguard Mid Cap Value | WisdomTree SmallCap vs. Vanguard Small Cap Growth | WisdomTree SmallCap vs. Vanguard Value Index | WisdomTree SmallCap vs. Vanguard Small Cap Index |
High-yield Municipal vs. Nuveen High Yield | High-yield Municipal vs. HUMANA INC | High-yield Municipal vs. Morningstar Unconstrained Allocation | High-yield Municipal vs. Via Renewables |
Check out your portfolio center.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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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