Correlation Between Wilshire 5000 and Small Company

Can any of the company-specific risk be diversified away by investing in both Wilshire 5000 and Small Company 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 Wilshire 5000 and Small Company into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wilshire 5000 Index and Small Pany Value, you can compare the effects of market volatilities on Wilshire 5000 and Small Company 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 Wilshire 5000 with a short position of Small Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wilshire 5000 and Small Company.

Diversification Opportunities for Wilshire 5000 and Small Company

0.0

Correlation Coefficient

Wilshire 5000  Small Company

Pay attention - limited upside

The 3 months correlation between Wilshire and Small is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Wilshire 5000 Index and Small Pany Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Pany Value and Wilshire 5000 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 Wilshire 5000 Index are associated (or correlated) with Small Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Pany Value has no effect on the direction of Wilshire 5000 i.e., Wilshire 5000 and Small Company go up and down completely randomly.

Pair Corralation between Wilshire 5000 and Small Company

If you would invest  2,489  in Small Pany Value on February 20, 2024 and sell it today you would earn a total of  156.00  from holding Small Pany Value or generate 6.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Wilshire 5000 Index  vs.  Small Pany Value

Wilshire 5000 Index

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Wilshire 5000 Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Wilshire 5000 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Small Pany Value

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Small Pany Value are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Small Company is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wilshire 5000 and Small Company

The main advantage of trading using opposite Wilshire 5000 and Small Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wilshire 5000 position performs unexpectedly, Small Company 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 Small Company will offset losses from the drop in Small Company's long position.

The idea behind Wilshire 5000 Index and Small Pany Value 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.