Correlation Between Wasatch Small and Small Cap
Can any of the company-specific risk be diversified away by investing in both Wasatch Small and Small Cap 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 Small Cap 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 Small Cap Value, you can compare the effects of market volatilities on Wasatch Small and Small Cap 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 Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wasatch Small and Small Cap.
Diversification Opportunities for Wasatch Small and Small Cap
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Wasatch and Small is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Small Cap and Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Value has no effect on the direction of Wasatch Small i.e., Wasatch Small and Small Cap go up and down completely randomly.
Pair Corralation between Wasatch Small and Small Cap
Assuming the 90 days horizon Wasatch Small Cap is expected to generate 0.96 times more return on investment than Small Cap. However, Wasatch Small Cap is 1.04 times less risky than Small Cap. It trades about 0.07 of its potential returns per unit of risk. Small Cap Value is currently generating about 0.05 per unit of risk. If you would invest 819.00 in Wasatch Small Cap on September 5, 2024 and sell it today you would earn a total of 431.00 from holding Wasatch Small Cap or generate 52.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Wasatch Small Cap vs. Small Cap Value
Performance |
| Timeline |
| Wasatch Small Cap |
| Small Cap Value |
Wasatch Small and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wasatch Small and Small Cap
The main advantage of trading using opposite Wasatch Small and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wasatch Small position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Wasatch Small vs. Vanguard Windsor Fund | Wasatch Small vs. Commonwealth Global Fund | Wasatch Small vs. Eic Value Fund | Wasatch Small vs. Small Cap Stock |
| Small Cap vs. Adams Diversified Equity | Small Cap vs. Wasatch Small Cap | Small Cap vs. Pgim Jennison Diversified | Small Cap vs. Lord Abbett Diversified |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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