Correlation Between Europe 125x and Wasatch Small

Can any of the company-specific risk be diversified away by investing in both Europe 125x and Wasatch Small 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 Europe 125x and Wasatch Small into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Europe 125x Strategy and Wasatch Small Cap, you can compare the effects of market volatilities on Europe 125x and Wasatch Small 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 Europe 125x with a short position of Wasatch Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Europe 125x and Wasatch Small.

Diversification Opportunities for Europe 125x and Wasatch Small

-0.18

Correlation Coefficient

Europe 125x  Wasatch Small

Good diversification

The 3 months correlation between Europe and Wasatch is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Europe 125x Strategy and Wasatch Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Small Cap and Europe 125x 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 Europe 125x Strategy are associated (or correlated) with Wasatch Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Small Cap has no effect on the direction of Europe 125x i.e., Europe 125x and Wasatch Small go up and down completely randomly.

Pair Corralation between Europe 125x and Wasatch Small

Assuming the 90 days horizon Europe 125x Strategy is expected to under-perform the Wasatch Small. In addition to that, Europe 125x is 1.07 times more volatile than Wasatch Small Cap. It trades about -0.03 of its total potential returns per unit of risk. Wasatch Small Cap is currently generating about 0.07 per unit of volatility. If you would invest  3,556  in Wasatch Small Cap on October 5, 2024 and sell it today you would earn a total of  700.00  from holding Wasatch Small Cap or generate 19.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Europe 125x Strategy  vs.  Wasatch Small Cap

Europe 125x Strategy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Europe 125x Strategy 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 February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Wasatch Small Cap

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wasatch Small Cap are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Wasatch Small may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Europe 125x and Wasatch Small

The main advantage of trading using opposite Europe 125x and Wasatch Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Europe 125x position performs unexpectedly, Wasatch Small 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 Small will offset losses from the drop in Wasatch Small's long position.

The idea behind Europe 125x Strategy and Wasatch Small Cap 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.