Correlation Between Wasatch Small and Emerald Insights

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

Diversification Opportunities for Wasatch Small and Emerald Insights

0.6

Correlation Coefficient

Wasatch Small  Emerald Insights

Poor diversification

The 3 months correlation between Wasatch and Emerald is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Small Cap and Emerald Insights Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerald Insights 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 Emerald Insights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerald Insights has no effect on the direction of Wasatch Small i.e., Wasatch Small and Emerald Insights go up and down completely randomly.

Pair Corralation between Wasatch Small and Emerald Insights

Assuming the 90 days horizon Wasatch Small Cap is expected to under-perform the Emerald Insights. In addition to that, Wasatch Small is 4.02 times more volatile than Emerald Insights Fund. It trades about -0.2 of its total potential returns per unit of risk. Emerald Insights Fund is currently generating about 0.3 per unit of volatility. If you would invest  1,886  in Emerald Insights Fund on September 17, 2024 and sell it today you would earn a total of  95.00  from holding Emerald Insights Fund or generate 5.04% 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.  Emerald Insights Fund

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 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.

Emerald Insights

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Emerald Insights Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Emerald Insights may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Wasatch Small and Emerald Insights

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

The idea behind Wasatch Small Cap and Emerald Insights Fund 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.