Correlation Between Wasatch Frontier and Wasatch Core

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

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

Diversification Opportunities for Wasatch Frontier and Wasatch Core

0.3

Correlation Coefficient

Wasatch Frontier  Wasatch Core

Weak diversification

The 3 months correlation between Wasatch and Wasatch is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Frontier Emerging and Wasatch E Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch E Growth and Wasatch Frontier 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 Frontier Emerging are associated (or correlated) with Wasatch Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch E Growth has no effect on the direction of Wasatch Frontier i.e., Wasatch Frontier and Wasatch Core go up and down completely randomly.

Pair Corralation between Wasatch Frontier and Wasatch Core

Assuming the 90 days horizon Wasatch Frontier Emerging is expected to generate about the same return on investment as Wasatch E Growth. But, Wasatch Frontier Emerging is 1.6 times less risky than Wasatch Core. It trades about 0.08 of its potential returns per unit of risk. Wasatch E Growth is currently generating about 0.05 per unit of risk. If you would invest  7,066  in Wasatch E Growth on October 10, 2024 and sell it today you would earn a total of  2,099  from holding Wasatch E Growth or generate 29.71% return on investment over 90 days.

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

Wasatch Frontier Emerging  vs.  Wasatch E Growth

Wasatch Frontier Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wasatch Frontier Emerging has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Wasatch Frontier is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wasatch E Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wasatch E Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Wasatch Core 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 Frontier and Wasatch Core

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

The idea behind Wasatch Frontier Emerging and Wasatch E Growth 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.