Correlation Between Wasatch Small and Income Fund

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

Diversification Opportunities for Wasatch Small and Income Fund

0.74

Correlation Coefficient

Wasatch Small  Income Fund

Poor diversification

The 3 months correlation between Wasatch and Income is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Small Cap and Income Fund Of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Income Fund 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 Income Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Income Fund has no effect on the direction of Wasatch Small i.e., Wasatch Small and Income Fund go up and down completely randomly.

Pair Corralation between Wasatch Small and Income Fund

Assuming the 90 days horizon Wasatch Small Cap is expected to generate 2.65 times more return on investment than Income Fund. However, Wasatch Small is 2.65 times more volatile than Income Fund Of. It trades about 0.04 of its potential returns per unit of risk. Income Fund Of is currently generating about 0.05 per unit of risk. If you would invest  807.00  in Wasatch Small Cap on September 20, 2024 and sell it today you would earn a total of  190.00  from holding Wasatch Small Cap or generate 23.54% return on investment over 90 days.

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

Wasatch Small Cap  vs.  Income Fund Of

Wasatch Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wasatch Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Income Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Income Fund Of has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Income Fund is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wasatch Small and Income Fund

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

The idea behind Wasatch Small Cap and Income Fund Of 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.