Correlation Between Wasatch Small and Artisan Small

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

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

Diversification Opportunities for Wasatch Small and Artisan Small

0.72

Correlation Coefficient

Wasatch Small  Artisan Small

Poor diversification

The 3 months correlation between Wasatch and Artisan is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Small Cap and Artisan Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Artisan Small Cap and Wasatch Small 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 Small Cap are associated (or correlated) with Artisan Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Artisan Small Cap has no effect on the direction of Wasatch Small i.e., Wasatch Small and Artisan Small go up and down completely randomly.

Pair Corralation between Wasatch Small and Artisan Small

Assuming the 90 days horizon Wasatch Small Cap is expected to generate 0.64 times more return on investment than Artisan Small. However, Wasatch Small Cap is 1.57 times less risky than Artisan Small. It trades about -0.18 of its potential returns per unit of risk. Artisan Small Cap is currently generating about -0.24 per unit of risk. If you would invest  4,485  in Wasatch Small Cap on October 8, 2024 and sell it today you would lose (177.00) from holding Wasatch Small Cap or give up 3.95% of portfolio value over 90 days.

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

Wasatch Small Cap  vs.  Artisan Small Cap

Wasatch Small Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wasatch Small Cap are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Wasatch Small may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Artisan Small Cap

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Artisan Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Artisan Small 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 Small and Artisan Small

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

The idea behind Wasatch Small Cap and Artisan Small 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.