Correlation Between American Fds and Wasatch Global

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

By analyzing existing cross correlation between American Fds Smallcap and Wasatch Global Opportunities, you can compare the effects of market volatilities on American Fds and Wasatch Global 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 American Fds with a short position of Wasatch Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Fds and Wasatch Global.

Diversification Opportunities for American Fds and Wasatch Global

0.83

Correlation Coefficient

American Fds  Wasatch Global

Very poor diversification

The 3 months correlation between American and Wasatch is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding American Fds Smallcap and Wasatch Global Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Global Oppor and American Fds 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 American Fds Smallcap are associated (or correlated) with Wasatch Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Global Oppor has no effect on the direction of American Fds i.e., American Fds and Wasatch Global go up and down completely randomly.

Pair Corralation between American Fds and Wasatch Global

Assuming the 90 days horizon American Fds is expected to generate 1.42 times less return on investment than Wasatch Global. But when comparing it to its historical volatility, American Fds Smallcap is 1.19 times less risky than Wasatch Global. It trades about 0.04 of its potential returns per unit of risk. Wasatch Global Opportunities is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  382.00  in Wasatch Global Opportunities on November 20, 2024 and sell it today you would earn a total of  81.00  from holding Wasatch Global Opportunities or generate 21.2% return on investment over 90 days.

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

American Fds Smallcap  vs.  Wasatch Global Opportunities

American Fds Smallcap

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Fds Smallcap are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, American Fds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wasatch Global Oppor

Risk-Adjusted Performance

Very Weak

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

Pair Trading with American Fds and Wasatch Global

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

The idea behind American Fds Smallcap and Wasatch Global Opportunities 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.