Correlation Between Wasatch Greater and Northeast Investors

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

By analyzing existing cross correlation between Wasatch Greater China and Northeast Investors Trust, you can compare the effects of market volatilities on Wasatch Greater and Northeast Investors 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 Greater with a short position of Northeast Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wasatch Greater and Northeast Investors.

Diversification Opportunities for Wasatch Greater and Northeast Investors

0.6

Correlation Coefficient

Wasatch Greater  Northeast Investors

Poor diversification

The 3 months correlation between Wasatch and Northeast is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Greater China and Northeast Investors Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northeast Investors Trust and Wasatch Greater 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 Greater China are associated (or correlated) with Northeast Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northeast Investors Trust has no effect on the direction of Wasatch Greater i.e., Wasatch Greater and Northeast Investors go up and down completely randomly.

Pair Corralation between Wasatch Greater and Northeast Investors

Assuming the 90 days horizon Wasatch Greater China is expected to under-perform the Northeast Investors. In addition to that, Wasatch Greater is 4.4 times more volatile than Northeast Investors Trust. It trades about -0.03 of its total potential returns per unit of risk. Northeast Investors Trust is currently generating about 0.11 per unit of volatility. If you would invest  312.00  in Northeast Investors Trust on September 14, 2024 and sell it today you would earn a total of  55.00  from holding Northeast Investors Trust or generate 17.63% return on investment over 90 days.

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

Wasatch Greater China  vs.  Northeast Investors Trust

Wasatch Greater China

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wasatch Greater China are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Wasatch Greater showed solid returns over the last few months and may actually be approaching a breakup point.

Northeast Investors Trust

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Northeast Investors Trust are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Northeast Investors 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 Greater and Northeast Investors

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

The idea behind Wasatch Greater China and Northeast Investors Trust 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.