Correlation Between IShares IBonds and WisdomTree SmallCap

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

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

Diversification Opportunities for IShares IBonds and WisdomTree SmallCap

-0.8

Correlation Coefficient

IShares IBonds  WisdomTree SmallCap

Pay attention - limited upside

The 3 months correlation between IShares and WisdomTree is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares iBonds Dec and WisdomTree SmallCap Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree SmallCap and IShares IBonds 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 iShares iBonds Dec 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 IShares IBonds i.e., IShares IBonds and WisdomTree SmallCap go up and down completely randomly.

Pair Corralation between IShares IBonds and WisdomTree SmallCap

Given the investment horizon of 90 days iShares iBonds Dec is expected to generate 0.19 times more return on investment than WisdomTree SmallCap. However, iShares iBonds Dec is 5.24 times less risky than WisdomTree SmallCap. It trades about -0.02 of its potential returns per unit of risk. WisdomTree SmallCap Quality is currently generating about -0.04 per unit of risk. If you would invest  2,566  in iShares iBonds Dec on January 31, 2025 and sell it today you would lose (8.00) from holding iShares iBonds Dec or give up 0.31% of portfolio value over 90 days.

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

iShares iBonds Dec  vs.  WisdomTree SmallCap Quality

iShares iBonds Dec

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares iBonds Dec are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, IShares IBonds is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

WisdomTree SmallCap

Risk-Adjusted Performance

Very Weak

Over the last 90 days WisdomTree SmallCap Quality has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Etf's primary indicators remain quite persistent which may send shares a bit higher in June 2025. The latest mess may also be a sign of long-standing up-swing for the ETF venture institutional investors.

Pair Trading with IShares IBonds and WisdomTree SmallCap

The main advantage of trading using opposite IShares IBonds and WisdomTree SmallCap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares IBonds 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 iShares iBonds Dec 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.