Correlation Between Wasatch Micro and Wasatch Strategic

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

Diversification Opportunities for Wasatch Micro and Wasatch Strategic

0.07

Correlation Coefficient

Wasatch Micro  Wasatch Strategic

Significant diversification

The 3 months correlation between Wasatch and Wasatch is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Micro Cap and Wasatch Strategic Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Strategic Income 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 Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Strategic Income has no effect on the direction of Wasatch Micro i.e., Wasatch Micro and Wasatch Strategic go up and down completely randomly.

Pair Corralation between Wasatch Micro and Wasatch Strategic

Assuming the 90 days horizon Wasatch Micro Cap is expected to under-perform the Wasatch Strategic. In addition to that, Wasatch Micro is 1.47 times more volatile than Wasatch Strategic Income. It trades about -0.16 of its total potential returns per unit of risk. Wasatch Strategic Income is currently generating about 0.01 per unit of volatility. If you would invest  1,160  in Wasatch Strategic Income on December 1, 2024 and sell it today you would earn a total of  5.00  from holding Wasatch Strategic Income or generate 0.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Wasatch Micro Cap  vs.  Wasatch Strategic Income

Wasatch Micro Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wasatch Micro Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Wasatch Strategic Income

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wasatch Strategic Income are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Wasatch Strategic 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 Micro and Wasatch Strategic

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

The idea behind Wasatch Micro Cap and Wasatch Strategic Income 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.