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

0.87

Correlation Coefficient

Wasatch Strategic  Wasatch World

Very poor diversification

The 3 months correlation between Wasatch and Wasatch is 0.87. 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 Income is expected to generate 0.97 times more return on investment than Wasatch World. However, Wasatch Strategic Income is 1.03 times less risky than Wasatch World. It trades about 0.0 of its potential returns per unit of risk. Wasatch World Innovators is currently generating about -0.02 per unit of risk. If you would invest  1,144  in Wasatch Strategic Income on December 30, 2024 and sell it today you would lose (4.00) from holding Wasatch Strategic Income or give up 0.35% of portfolio value over 90 days.

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

Wasatch Strategic Income  vs.  Wasatch World Innovators

Wasatch Strategic Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wasatch Strategic Income has generated negative risk-adjusted returns adding no value to fund investors. 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

Very Weak

Over the last 90 days Wasatch World Innovators has generated negative risk-adjusted returns adding no value to fund investors. 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.