Correlation Between Consumer Services and Wasatch World

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

By analyzing existing cross correlation between Consumer Services Ultrasector and Wasatch World Innovators, you can compare the effects of market volatilities on Consumer Services and Wasatch World 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 Consumer Services with a short position of Wasatch World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Services and Wasatch World.

Diversification Opportunities for Consumer Services and Wasatch World

-0.45

Correlation Coefficient

Consumer Services  Wasatch World

Very good diversification

The 3 months correlation between Consumer and Wasatch is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Services Ultrasector and Wasatch World Innovators in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch World Innovators and Consumer Services 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 Consumer Services Ultrasector are associated (or correlated) with Wasatch World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch World Innovators has no effect on the direction of Consumer Services i.e., Consumer Services and Wasatch World go up and down completely randomly.

Pair Corralation between Consumer Services and Wasatch World

Assuming the 90 days horizon Consumer Services Ultrasector is expected to under-perform the Wasatch World. In addition to that, Consumer Services is 2.25 times more volatile than Wasatch World Innovators. It trades about -0.16 of its total potential returns per unit of risk. Wasatch World Innovators is currently generating about -0.02 per unit of volatility. If you would invest  1,394  in Wasatch World Innovators on December 30, 2024 and sell it today you would lose (22.00) from holding Wasatch World Innovators or give up 1.58% of portfolio value over 90 days.

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

Consumer Services Ultrasector  vs.  Wasatch World Innovators

Consumer Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Consumer Services Ultrasector has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Wasatch World Innovators

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Consumer Services and Wasatch World

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

The idea behind Consumer Services Ultrasector and Wasatch World Innovators 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.