Correlation Between Wasatch Micro and Wasatch Us

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

Diversification Opportunities for Wasatch Micro and Wasatch Us

0.82

Correlation Coefficient

Wasatch Micro  Wasatch Us

Very poor diversification

The 3 months correlation between WASATCH and Wasatch is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Micro Cap and Wasatch Select Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Select Investor 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 Us. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Select Investor has no effect on the direction of Wasatch Micro i.e., Wasatch Micro and Wasatch Us go up and down completely randomly.

Pair Corralation between Wasatch Micro and Wasatch Us

Assuming the 90 days horizon Wasatch Micro Cap is expected to under-perform the Wasatch Us. In addition to that, Wasatch Micro is 1.11 times more volatile than Wasatch Select Investor. It trades about -0.12 of its total potential returns per unit of risk. Wasatch Select Investor is currently generating about -0.1 per unit of volatility. If you would invest  1,494  in Wasatch Select Investor on December 30, 2024 and sell it today you would lose (106.00) from holding Wasatch Select Investor or give up 7.1% of portfolio value over 90 days.

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

Wasatch Micro Cap  vs.  Wasatch Select Investor

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 Select Investor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wasatch Select Investor 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.

Pair Trading with Wasatch Micro and Wasatch Us

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

The idea behind Wasatch Micro Cap and Wasatch Select Investor 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.