Correlation Between Wasatch Strategic and Wasatch World

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

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

Diversification Opportunities for Wasatch Strategic and Wasatch World

0.97

Correlation Coefficient

Wasatch Strategic  Wasatch World

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 Strategic Income and Wasatch World Innovators in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch World Innovators and Wasatch Strategic 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 Strategic Income are associated (or correlated) with Wasatch World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch World Innovators has no effect on the direction of Wasatch Strategic i.e., Wasatch Strategic and Wasatch World go up and down completely randomly.

Pair Corralation between Wasatch Strategic and Wasatch World

Assuming the 90 days horizon Wasatch Strategic is expected to generate 1.63 times less return on investment than Wasatch World. But when comparing it to its historical volatility, Wasatch Strategic Income is 1.13 times less risky than Wasatch World. It trades about 0.03 of its potential returns per unit of risk. Wasatch World Innovators is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,372  in Wasatch World Innovators on September 4, 2024 and sell it today you would earn a total of  26.00  from holding Wasatch World Innovators or generate 1.9% return on investment over 90 days.

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

Wasatch Strategic Income  vs.  Wasatch World Innovators

Wasatch Strategic Income

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wasatch Strategic Income are ranked lower than 2 (%) 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.

Wasatch World Innovators

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wasatch World Innovators are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Wasatch World 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 Strategic and Wasatch World

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

The idea behind Wasatch Strategic Income and Wasatch World Innovators 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.