Correlation Between Wasatch Large and Equity Series

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

By analyzing existing cross correlation between Wasatch Large Cap and Equity Series Class, you can compare the effects of market volatilities on Wasatch Large and Equity Series 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 Wasatch Large with a short position of Equity Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wasatch Large and Equity Series.

Diversification Opportunities for Wasatch Large and Equity Series

0.72

Correlation Coefficient

Wasatch Large  Equity Series

Poor diversification

The 3 months correlation between Wasatch and Equity is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Large Cap and Equity Series Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Series Class and Wasatch Large 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 Wasatch Large Cap are associated (or correlated) with Equity Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Series Class has no effect on the direction of Wasatch Large i.e., Wasatch Large and Equity Series go up and down completely randomly.

Pair Corralation between Wasatch Large and Equity Series

Assuming the 90 days horizon Wasatch Large Cap is expected to generate 0.62 times more return on investment than Equity Series. However, Wasatch Large Cap is 1.6 times less risky than Equity Series. It trades about -0.03 of its potential returns per unit of risk. Equity Series Class is currently generating about -0.15 per unit of risk. If you would invest  1,000.00  in Wasatch Large Cap on December 1, 2024 and sell it today you would lose (20.00) from holding Wasatch Large Cap or give up 2.0% of portfolio value over 90 days.

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

Wasatch Large Cap  vs.  Equity Series Class

Wasatch Large Cap

Risk-Adjusted Performance

Very Weak

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

Equity Series Class

Risk-Adjusted Performance

Very Weak

Over the last 90 days Equity Series Class 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.

Pair Trading with Wasatch Large and Equity Series

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

The idea behind Wasatch Large Cap and Equity Series Class 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.