Correlation Between Wasatch Small and Df Dent

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

Diversification Opportunities for Wasatch Small and Df Dent

0.52

Correlation Coefficient

Wasatch Small  Df Dent

Very weak diversification

The 3 months correlation between Wasatch and DFDSX is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Small Cap and Df Dent Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Df Dent Small 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 Df Dent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Df Dent Small has no effect on the direction of Wasatch Small i.e., Wasatch Small and Df Dent go up and down completely randomly.

Pair Corralation between Wasatch Small and Df Dent

Assuming the 90 days horizon Wasatch Small Cap is expected to under-perform the Df Dent. In addition to that, Wasatch Small is 3.37 times more volatile than Df Dent Small. It trades about -0.33 of its total potential returns per unit of risk. Df Dent Small is currently generating about -0.35 per unit of volatility. If you would invest  2,667  in Df Dent Small on October 1, 2024 and sell it today you would lose (184.00) from holding Df Dent Small or give up 6.9% of portfolio value over 90 days.

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

Wasatch Small Cap  vs.  Df Dent Small

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.

Df Dent Small

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Wasatch Small Cap and Df Dent Small 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.