Correlation Between Wasatch Core and Wasatch Micro
Can any of the company-specific risk be diversified away by investing in both Wasatch Core 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 Core 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 E Growth and Wasatch Micro Cap, you can compare the effects of market volatilities on Wasatch Core 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 Core with a short position of Wasatch Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wasatch Core and Wasatch Micro.
Diversification Opportunities for Wasatch Core and Wasatch Micro
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Wasatch and Wasatch is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch E 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 Core 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 E 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 Core i.e., Wasatch Core and Wasatch Micro go up and down completely randomly.
Pair Corralation between Wasatch Core and Wasatch Micro
Assuming the 90 days horizon Wasatch E Growth is expected to generate 0.75 times more return on investment than Wasatch Micro. However, Wasatch E Growth is 1.33 times less risky than Wasatch Micro. It trades about 0.31 of its potential returns per unit of risk. Wasatch Micro Cap is currently generating about 0.17 per unit of risk. If you would invest 9,794 in Wasatch E Growth on August 29, 2024 and sell it today you would earn a total of 952.00 from holding Wasatch E Growth or generate 9.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wasatch E Growth vs. Wasatch Micro Cap
Performance |
| Timeline |
| Wasatch E Growth |
| Wasatch Micro Cap |
Wasatch Core and Wasatch Micro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wasatch Core and Wasatch Micro
The main advantage of trading using opposite Wasatch Core and Wasatch Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wasatch Core 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.| Wasatch Core vs. Wasatch Small Cap | Wasatch Core vs. Wasatch Small Cap | Wasatch Core vs. Wasatch Micro Cap | Wasatch Core vs. Wasatch Ultra Growth |
| 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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