Correlation Between Wasatch Small and Wasatch Longshort
Can any of the company-specific risk be diversified away by investing in both Wasatch Small and Wasatch Longshort 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 Small and Wasatch Longshort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wasatch Small Cap and Wasatch Longshort Alpha, you can compare the effects of market volatilities on Wasatch Small and Wasatch Longshort 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 Small with a short position of Wasatch Longshort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wasatch Small and Wasatch Longshort.
Diversification Opportunities for Wasatch Small and Wasatch Longshort
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Wasatch and Wasatch is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Small Cap and Wasatch Longshort Alpha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Longshort Alpha and Wasatch Small 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 Small Cap are associated (or correlated) with Wasatch Longshort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Longshort Alpha has no effect on the direction of Wasatch Small i.e., Wasatch Small and Wasatch Longshort go up and down completely randomly.
Pair Corralation between Wasatch Small and Wasatch Longshort
Assuming the 90 days horizon Wasatch Small Cap is expected to generate 1.51 times more return on investment than Wasatch Longshort. However, Wasatch Small is 1.51 times more volatile than Wasatch Longshort Alpha. It trades about 0.12 of its potential returns per unit of risk. Wasatch Longshort Alpha is currently generating about 0.04 per unit of risk. If you would invest 1,160 in Wasatch Small Cap on August 28, 2024 and sell it today you would earn a total of 113.00 from holding Wasatch Small Cap or generate 9.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wasatch Small Cap vs. Wasatch Longshort Alpha
Performance |
| Timeline |
| Wasatch Small Cap |
| Wasatch Longshort Alpha |
Wasatch Small and Wasatch Longshort Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wasatch Small and Wasatch Longshort
The main advantage of trading using opposite Wasatch Small and Wasatch Longshort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wasatch Small position performs unexpectedly, Wasatch Longshort 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 Longshort will offset losses from the drop in Wasatch Longshort's long position.| Wasatch Small vs. Wasatch Small Cap | Wasatch Small vs. Wasatch Emerging Markets | Wasatch Small vs. Wasatch Emerging Markets | Wasatch Small vs. Wasatch Global Select |
| Wasatch Longshort vs. Wasatch Small Cap | Wasatch Longshort vs. Wasatch Small Cap | Wasatch Longshort vs. Wasatch Frontier Emerging | Wasatch Longshort vs. Wasatch Emerging Markets |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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