Correlation Between Wasatch Small and Grant Park

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

Diversification Opportunities for Wasatch Small and Grant Park

0.24

Correlation Coefficient

Wasatch Small  Grant Park

Modest diversification

The 3 months correlation between Wasatch and Grant is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Small Cap and Grant Park Multi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grant Park Multi 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 Grant Park. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grant Park Multi has no effect on the direction of Wasatch Small i.e., Wasatch Small and Grant Park go up and down completely randomly.

Pair Corralation between Wasatch Small and Grant Park

Assuming the 90 days horizon Wasatch Small Cap is expected to under-perform the Grant Park. In addition to that, Wasatch Small is 4.85 times more volatile than Grant Park Multi. It trades about -0.09 of its total potential returns per unit of risk. Grant Park Multi is currently generating about -0.18 per unit of volatility. If you would invest  1,112  in Grant Park Multi on September 26, 2024 and sell it today you would lose (57.00) from holding Grant Park Multi or give up 5.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Wasatch Small Cap  vs.  Grant Park Multi

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.

Grant Park Multi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grant Park Multi has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Grant Park 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 Grant Park

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

The idea behind Wasatch Small Cap and Grant Park Multi 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.