Correlation Between Wasatch International and Wasatch Micro
Can any of the company-specific risk be diversified away by investing in both Wasatch International 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 International 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 International Growth and Wasatch Micro Cap, you can compare the effects of market volatilities on Wasatch International 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 International with a short position of Wasatch Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wasatch International and Wasatch Micro.
Diversification Opportunities for Wasatch International and Wasatch Micro
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Wasatch and Wasatch is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch International Growth 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 International 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 International Growth 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 International i.e., Wasatch International and Wasatch Micro go up and down completely randomly.
Pair Corralation between Wasatch International and Wasatch Micro
Assuming the 90 days horizon Wasatch International Growth is expected to under-perform the Wasatch Micro. But the mutual fund apears to be less risky and, when comparing its historical volatility, Wasatch International Growth is 2.48 times less risky than Wasatch Micro. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Wasatch Micro Cap is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 824.00 in Wasatch Micro Cap on August 29, 2024 and sell it today you would earn a total of 55.00 from holding Wasatch Micro Cap or generate 6.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wasatch International Growth vs. Wasatch Micro Cap
Performance |
| Timeline |
| Wasatch International |
| Wasatch Micro Cap |
Wasatch International and Wasatch Micro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wasatch International and Wasatch Micro
The main advantage of trading using opposite Wasatch International and Wasatch Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wasatch International 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 International Growth 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.
| Wasatch Micro vs. Wasatch Small Cap | Wasatch Micro vs. Wasatch Ultra Growth | Wasatch Micro vs. Wasatch E Growth | Wasatch Micro vs. Wasatch Small Cap |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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