Correlation Between Wasatch Micro and Wasatch Greater

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

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

Diversification Opportunities for Wasatch Micro and Wasatch Greater

-0.62

Correlation Coefficient

Wasatch Micro  Wasatch Greater

Excellent diversification

The 3 months correlation between Wasatch and Wasatch is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Micro Cap and Wasatch Greater China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Greater China and Wasatch Micro 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 Micro Cap are associated (or correlated) with Wasatch Greater. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Greater China has no effect on the direction of Wasatch Micro i.e., Wasatch Micro and Wasatch Greater go up and down completely randomly.

Pair Corralation between Wasatch Micro and Wasatch Greater

Assuming the 90 days horizon Wasatch Micro Cap is expected to generate 1.13 times more return on investment than Wasatch Greater. However, Wasatch Micro is 1.13 times more volatile than Wasatch Greater China. It trades about -0.32 of its potential returns per unit of risk. Wasatch Greater China is currently generating about -0.42 per unit of risk. If you would invest  442.00  in Wasatch Micro Cap on October 9, 2024 and sell it today you would lose (31.00) from holding Wasatch Micro Cap or give up 7.01% of portfolio value over 90 days.

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

Wasatch Micro Cap  vs.  Wasatch Greater China

Wasatch Micro Cap

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wasatch Micro Cap are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Wasatch Micro is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wasatch Greater China

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wasatch Greater China 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 February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Wasatch Micro and Wasatch Greater

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

The idea behind Wasatch Micro Cap and Wasatch Greater China 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..