Correlation Between Wasatch Emerging and Oberweis Micro-cap

Can any of the company-specific risk be diversified away by investing in both Wasatch Emerging and Oberweis Micro-cap 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 Oberweis Micro-cap 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 Oberweis Micro Cap Fund, you can compare the effects of market volatilities on Wasatch Emerging and Oberweis Micro-cap 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 Oberweis Micro-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wasatch Emerging and Oberweis Micro-cap.

Diversification Opportunities for Wasatch Emerging and Oberweis Micro-cap

0.83

Correlation Coefficient

Wasatch Emerging  Oberweis Micro-cap

Very poor diversification

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

Pair Corralation between Wasatch Emerging and Oberweis Micro-cap

Assuming the 90 days horizon Wasatch Emerging Markets is expected to generate 0.87 times more return on investment than Oberweis Micro-cap. However, Wasatch Emerging Markets is 1.16 times less risky than Oberweis Micro-cap. It trades about -0.19 of its potential returns per unit of risk. Oberweis Micro Cap Fund is currently generating about -0.17 per unit of risk. If you would invest  304.00  in Wasatch Emerging Markets on December 1, 2024 and sell it today you would lose (43.00) from holding Wasatch Emerging Markets or give up 14.14% of portfolio value over 90 days.

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

Wasatch Emerging Markets  vs.  Oberweis Micro Cap Fund

Wasatch Emerging Markets

Risk-Adjusted Performance

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 April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Oberweis Micro Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oberweis Micro Cap Fund 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 fundamental 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 Emerging and Oberweis Micro-cap

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

The idea behind Wasatch Emerging Markets and Oberweis Micro Cap Fund 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.