Correlation Between Wasatch Micro and Ultramid Cap

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

Diversification Opportunities for Wasatch Micro and Ultramid Cap

0.98

Correlation Coefficient

Wasatch Micro  Ultramid Cap

Almost no diversification

The 3 months correlation between Wasatch and Ultramid is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Micro Cap and Ultramid Cap Profund Ultramid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultramid Cap Profund 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 Ultramid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultramid Cap Profund has no effect on the direction of Wasatch Micro i.e., Wasatch Micro and Ultramid Cap go up and down completely randomly.

Pair Corralation between Wasatch Micro and Ultramid Cap

Assuming the 90 days horizon Wasatch Micro Cap is expected to generate about the same return on investment as Ultramid Cap Profund Ultramid Cap. But, Wasatch Micro Cap is 1.69 times less risky than Ultramid Cap. It trades about -0.13 of its potential returns per unit of risk. Ultramid Cap Profund Ultramid Cap is currently generating about -0.08 per unit of risk. If you would invest  5,292  in Ultramid Cap Profund Ultramid Cap on December 24, 2024 and sell it today you would lose (562.00) from holding Ultramid Cap Profund Ultramid Cap or give up 10.62% of portfolio value over 90 days.

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

Wasatch Micro Cap  vs.  Ultramid Cap Profund Ultramid

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.

Ultramid Cap Profund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ultramid Cap Profund Ultramid 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.

Pair Trading with Wasatch Micro and Ultramid Cap

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

The idea behind Wasatch Micro Cap and Ultramid Cap Profund Ultramid Cap 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.