Correlation Between Wcm Mid and Wcm Small

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

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

Diversification Opportunities for Wcm Mid and Wcm Small

0.94

Correlation Coefficient

Wcm Mid  Wcm Small

Almost no diversification

The 3 months correlation between Wcm and Wcm is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Wcm Mid Cap and Wcm Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wcm Small Cap and Wcm Mid 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 Wcm Mid Cap are associated (or correlated) with Wcm Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wcm Small Cap has no effect on the direction of Wcm Mid i.e., Wcm Mid and Wcm Small go up and down completely randomly.

Pair Corralation between Wcm Mid and Wcm Small

Assuming the 90 days horizon Wcm Mid Cap is expected to generate 0.69 times more return on investment than Wcm Small. However, Wcm Mid Cap is 1.45 times less risky than Wcm Small. It trades about -0.07 of its potential returns per unit of risk. Wcm Small Cap is currently generating about -0.08 per unit of risk. If you would invest  1,222  in Wcm Mid Cap on December 27, 2024 and sell it today you would lose (56.00) from holding Wcm Mid Cap or give up 4.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Wcm Mid Cap  vs.  Wcm Small Cap

Wcm Mid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wcm Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Wcm Mid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wcm Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wcm 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.

Pair Trading with Wcm Mid and Wcm Small

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

The idea behind Wcm Mid Cap and Wcm Small 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.