Correlation Between NYSE Composite and Wasatch Micro
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and Wasatch Micro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Wasatch Micro Cap, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of Wasatch Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Wasatch Micro.
Diversification Opportunities for NYSE Composite and Wasatch Micro
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and Wasatch is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite 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 NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and Wasatch Micro go up and down completely randomly.
Pair Corralation between NYSE Composite and Wasatch Micro
Assuming the 90 days trading horizon NYSE Composite is expected to generate 3.72 times less return on investment than Wasatch Micro. But when comparing it to its historical volatility, NYSE Composite is 2.24 times less risky than Wasatch Micro. It trades about 0.19 of its potential returns per unit of risk. Wasatch Micro Cap is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 398.00 in Wasatch Micro Cap on August 25, 2024 and sell it today you would earn a total of 44.00 from holding Wasatch Micro Cap or generate 11.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Wasatch Micro Cap
Performance |
| Timeline |
NYSE Composite and Wasatch Micro Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Wasatch Micro Cap
Pair trading matchups for Wasatch Micro
Pair Trading with NYSE Composite and Wasatch Micro
The main advantage of trading using opposite NYSE Composite and Wasatch Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. Awilco Drilling PLC | NYSE Composite vs. AKITA Drilling | NYSE Composite vs. SunOpta | NYSE Composite vs. Delek Drilling |
| Wasatch Micro vs. Vanguard Small Cap Growth | Wasatch Micro vs. Vanguard Small Cap Growth | Wasatch Micro vs. Vanguard Explorer Fund | Wasatch Micro vs. Vanguard Explorer Fund |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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