Correlation Between Wasatch Small and Wasatch Micro

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

Diversification Opportunities for Wasatch Small and Wasatch Micro

0.97

Correlation Coefficient

Wasatch Small  Wasatch Micro

Almost no diversification

The 3 months correlation between Wasatch and Wasatch is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Small Cap and Wasatch Micro Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Micro Cap 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 Wasatch Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Micro Cap has no effect on the direction of Wasatch Small i.e., Wasatch Small and Wasatch Micro go up and down completely randomly.

Pair Corralation between Wasatch Small and Wasatch Micro

Assuming the 90 days horizon Wasatch Small is expected to generate 1.43 times less return on investment than Wasatch Micro. In addition to that, Wasatch Small is 1.05 times more volatile than Wasatch Micro Cap. It trades about 0.14 of its total potential returns per unit of risk. Wasatch Micro Cap is currently generating about 0.21 per unit of volatility. If you would invest  380.00  in Wasatch Micro Cap on September 2, 2024 and sell it today you would earn a total of  66.00  from holding Wasatch Micro Cap or generate 17.37% return on investment over 90 days.

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

Wasatch Small Cap  vs.  Wasatch Micro Cap

Wasatch Small Cap

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wasatch Small Cap are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Wasatch Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Wasatch Micro Cap

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wasatch Micro Cap are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Wasatch Micro showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wasatch Small and Wasatch Micro

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

The idea behind Wasatch Small Cap and Wasatch Micro Cap 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 Transaction History module to view history of all your transactions and understand their impact on performance.