Correlation Between Wasatch Small and Wasatch Emerging

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

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

Diversification Opportunities for Wasatch Small and Wasatch Emerging

-0.56

Correlation Coefficient

Wasatch Small  Wasatch Emerging

Excellent diversification

The 3 months correlation between Wasatch and Wasatch is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Small Cap and Wasatch Emerging India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Emerging India and Wasatch Small 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 Small Cap are associated (or correlated) with Wasatch Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Emerging India has no effect on the direction of Wasatch Small i.e., Wasatch Small and Wasatch Emerging go up and down completely randomly.

Pair Corralation between Wasatch Small and Wasatch Emerging

Assuming the 90 days horizon Wasatch Small Cap is expected to generate 1.21 times more return on investment than Wasatch Emerging. However, Wasatch Small is 1.21 times more volatile than Wasatch Emerging India. It trades about 0.24 of its potential returns per unit of risk. Wasatch Emerging India is currently generating about -0.03 per unit of risk. If you would invest  3,768  in Wasatch Small Cap on September 4, 2024 and sell it today you would earn a total of  681.00  from holding Wasatch Small Cap or generate 18.07% return on investment over 90 days.

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

Wasatch Small Cap  vs.  Wasatch Emerging India

Wasatch Small Cap

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wasatch Small Cap are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Wasatch Small showed solid returns over the last few months and may actually be approaching a breakup point.

Wasatch Emerging India

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Wasatch Small and Wasatch Emerging

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

The idea behind Wasatch Small Cap and Wasatch Emerging India 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.