Correlation Between Wasatch Emerging and Wasatch Large

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

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

Diversification Opportunities for Wasatch Emerging and Wasatch Large

0.83

Correlation Coefficient

Wasatch Emerging  Wasatch Large

Very poor diversification

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

Pair Corralation between Wasatch Emerging and Wasatch Large

Assuming the 90 days horizon Wasatch Emerging Markets is expected to generate 1.32 times more return on investment than Wasatch Large. However, Wasatch Emerging is 1.32 times more volatile than Wasatch Large Cap. It trades about 0.02 of its potential returns per unit of risk. Wasatch Large Cap is currently generating about 0.02 per unit of risk. If you would invest  262.00  in Wasatch Emerging Markets on September 29, 2024 and sell it today you would earn a total of  18.00  from holding Wasatch Emerging Markets or generate 6.87% return on investment over 90 days.

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

Wasatch Emerging Markets  vs.  Wasatch Large Cap

Wasatch Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wasatch Emerging Markets 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 primary indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Wasatch Large Cap

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Wasatch Emerging and Wasatch Large

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

The idea behind Wasatch Emerging Markets and Wasatch Large 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.