Correlation Between Wasatch Emerging and International Opportunity

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

By analyzing existing cross correlation between Wasatch Emerging India and International Opportunity Portfolio, you can compare the effects of market volatilities on Wasatch Emerging and International Opportunity 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 International Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wasatch Emerging and International Opportunity.

Diversification Opportunities for Wasatch Emerging and International Opportunity

0.44

Correlation Coefficient

Wasatch Emerging  International Opportunity

Very weak diversification

The 3 months correlation between Wasatch and International is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Emerging India and International Opportunity Port in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Opportunity 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 India are associated (or correlated) with International Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Opportunity has no effect on the direction of Wasatch Emerging i.e., Wasatch Emerging and International Opportunity go up and down completely randomly.

Pair Corralation between Wasatch Emerging and International Opportunity

Assuming the 90 days horizon Wasatch Emerging India is expected to under-perform the International Opportunity. In addition to that, Wasatch Emerging is 1.67 times more volatile than International Opportunity Portfolio. It trades about -0.17 of its total potential returns per unit of risk. International Opportunity Portfolio is currently generating about 0.14 per unit of volatility. If you would invest  2,807  in International Opportunity Portfolio on October 26, 2024 and sell it today you would earn a total of  55.00  from holding International Opportunity Portfolio or generate 1.96% return on investment over 90 days.

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

Wasatch Emerging India  vs.  International Opportunity Port

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 weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

International Opportunity

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in International Opportunity Portfolio are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, International Opportunity 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 Emerging and International Opportunity

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

The idea behind Wasatch Emerging India and International Opportunity Portfolio 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.