Correlation Between Wasatch Micro and Wasatch Ultra

Can any of the company-specific risk be diversified away by investing in both Wasatch Micro and Wasatch Ultra 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 Micro and Wasatch Ultra into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wasatch Micro Cap and Wasatch Ultra Growth, you can compare the effects of market volatilities on Wasatch Micro and Wasatch Ultra 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 Micro with a short position of Wasatch Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wasatch Micro and Wasatch Ultra.

Diversification Opportunities for Wasatch Micro and Wasatch Ultra

0.98

Correlation Coefficient

Wasatch Micro  Wasatch Ultra

Almost no diversification

The 3 months correlation between Wasatch and Wasatch is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Micro Cap and Wasatch Ultra Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Ultra Growth and Wasatch Micro 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 Micro Cap are associated (or correlated) with Wasatch Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Ultra Growth has no effect on the direction of Wasatch Micro i.e., Wasatch Micro and Wasatch Ultra go up and down completely randomly.

Pair Corralation between Wasatch Micro and Wasatch Ultra

Assuming the 90 days horizon Wasatch Micro Cap is expected to generate 1.16 times more return on investment than Wasatch Ultra. However, Wasatch Micro is 1.16 times more volatile than Wasatch Ultra Growth. It trades about 0.16 of its potential returns per unit of risk. Wasatch Ultra Growth is currently generating about 0.14 per unit of risk. If you would invest  769.00  in Wasatch Micro Cap on September 12, 2024 and sell it today you would earn a total of  108.00  from holding Wasatch Micro Cap or generate 14.04% return on investment over 90 days.

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

Wasatch Micro Cap  vs.  Wasatch Ultra Growth

Wasatch Micro Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wasatch Micro Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Wasatch Micro showed solid returns over the last few months and may actually be approaching a breakup point.

Wasatch Ultra Growth

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Wasatch Micro and Wasatch Ultra

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

The idea behind Wasatch Micro Cap and Wasatch Ultra Growth 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..