Correlation Between Diamond Hill and WisdomTree SmallCap

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

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

Diversification Opportunities for Diamond Hill and WisdomTree SmallCap

0.7

Correlation Coefficient

Diamond Hill  WisdomTree SmallCap

Poor diversification

The 3 months correlation between Diamond and WisdomTree is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Funds and WisdomTree SmallCap Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree SmallCap and Diamond Hill 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 Diamond Hill Funds are associated (or correlated) with WisdomTree SmallCap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree SmallCap has no effect on the direction of Diamond Hill i.e., Diamond Hill and WisdomTree SmallCap go up and down completely randomly.

Pair Corralation between Diamond Hill and WisdomTree SmallCap

Given the investment horizon of 90 days Diamond Hill Funds is expected to under-perform the WisdomTree SmallCap. But the etf apears to be less risky and, when comparing its historical volatility, Diamond Hill Funds is 1.51 times less risky than WisdomTree SmallCap. The etf trades about -0.04 of its potential returns per unit of risk. The WisdomTree SmallCap Quality is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,831  in WisdomTree SmallCap Quality on August 29, 2025 and sell it today you would earn a total of  38.00  from holding WisdomTree SmallCap Quality or generate 1.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	68.25%
Values	Daily Returns

Diamond Hill Funds  vs.  WisdomTree SmallCap Quality

Diamond Hill Funds

Risk-Adjusted Performance

Weakest

Over the last 90 days Diamond Hill Funds has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Diamond Hill is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

WisdomTree SmallCap

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree SmallCap Quality are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent primary indicators, WisdomTree SmallCap is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Diamond Hill and WisdomTree SmallCap

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

The idea behind Diamond Hill Funds and WisdomTree SmallCap Quality 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.