Correlation Between Wasatch Ultra and Wasatch Micro

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

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

Diversification Opportunities for Wasatch Ultra and Wasatch Micro

0.97

Correlation Coefficient

Wasatch Ultra  Wasatch Micro

Almost no diversification

The 3 months correlation between Wasatch and Wasatch is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Ultra Growth and Wasatch Micro Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Micro Cap and Wasatch Ultra 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 Ultra Growth are associated (or correlated) with Wasatch Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Micro Cap has no effect on the direction of Wasatch Ultra i.e., Wasatch Ultra and Wasatch Micro go up and down completely randomly.

Pair Corralation between Wasatch Ultra and Wasatch Micro

Assuming the 90 days horizon Wasatch Ultra is expected to generate 1.21 times less return on investment than Wasatch Micro. But when comparing it to its historical volatility, Wasatch Ultra Growth is 1.26 times less risky than Wasatch Micro. It trades about 0.23 of its potential returns per unit of risk. Wasatch Micro Cap is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  808.00  in Wasatch Micro Cap on August 31, 2024 and sell it today you would earn a total of  71.00  from holding Wasatch Micro Cap or generate 8.79% return on investment over 90 days.

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

Wasatch Ultra Growth  vs.  Wasatch Micro Cap

Wasatch Ultra Growth

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wasatch Ultra Growth are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Wasatch Ultra showed solid returns over the last few months and may actually be approaching a breakup point.

Wasatch Micro Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wasatch Micro Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Wasatch Micro showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wasatch Ultra and Wasatch Micro

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

The idea behind Wasatch Ultra Growth and Wasatch Micro 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.

Check out your portfolio center.

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.