Correlation Between Small Cap and Wasatch Small
Can any of the company-specific risk be diversified away by investing in both Small Cap and Wasatch 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 Small Cap and Wasatch Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Equity and Wasatch Small Cap, you can compare the effects of market volatilities on Small Cap and Wasatch 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 Small Cap with a short position of Wasatch Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Wasatch Small.
Diversification Opportunities for Small Cap and Wasatch Small
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Small and Wasatch is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Equity and Wasatch Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Small Cap and Small Cap 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 Small Cap Equity are associated (or correlated) with Wasatch Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Small Cap has no effect on the direction of Small Cap i.e., Small Cap and Wasatch Small go up and down completely randomly.
Pair Corralation between Small Cap and Wasatch Small
Assuming the 90 days horizon Small Cap is expected to generate 1.25 times less return on investment than Wasatch Small. In addition to that, Small Cap is 1.15 times more volatile than Wasatch Small Cap. It trades about 0.27 of its total potential returns per unit of risk. Wasatch Small Cap is currently generating about 0.39 per unit of volatility. If you would invest 3,960 in Wasatch Small Cap on September 1, 2024 and sell it today you would earn a total of 498.00 from holding Wasatch Small Cap or generate 12.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Small Cap Equity vs. Wasatch Small Cap
Performance |
| Timeline |
| Small Cap Equity |
| Wasatch Small Cap |
Small Cap and Wasatch Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Wasatch Small
The main advantage of trading using opposite Small Cap and Wasatch Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Wasatch 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 Wasatch Small will offset losses from the drop in Wasatch Small's long position.| Small Cap vs. Large Cap Growth | Small Cap vs. Lazard International Strategic | Small Cap vs. Equity Income Fund | Small Cap vs. Large Cap E |
| Wasatch Small vs. Wasatch E Growth | Wasatch Small vs. Wasatch Small Cap | Wasatch Small vs. Wasatch Micro Cap | Wasatch Small vs. Wasatch Ultra Growth |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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