Correlation Between Wasatch Small and American Funds
Can any of the company-specific risk be diversified away by investing in both Wasatch Small and American Funds 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 American Funds 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 American Funds 2040, you can compare the effects of market volatilities on Wasatch Small and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wasatch Small and American Funds.
Diversification Opportunities for Wasatch Small and American Funds
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Wasatch and American is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Small Cap and American Funds 2040 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2040 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds 2040 has no effect on the direction of Wasatch Small i.e., Wasatch Small and American Funds go up and down completely randomly.
Pair Corralation between Wasatch Small and American Funds
Assuming the 90 days horizon Wasatch Small Cap is expected to generate 1.94 times more return on investment than American Funds. However, Wasatch Small is 1.94 times more volatile than American Funds 2040. It trades about 0.08 of its potential returns per unit of risk. American Funds 2040 is currently generating about 0.11 per unit of risk. If you would invest 805.00 in Wasatch Small Cap on September 12, 2024 and sell it today you would earn a total of 430.00 from holding Wasatch Small Cap or generate 53.42% 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. American Funds 2040
Performance |
| Timeline |
| Wasatch Small Cap |
| American Funds 2040 |
Wasatch Small and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wasatch Small and American Funds
The main advantage of trading using opposite Wasatch Small and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wasatch Small position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Wasatch Small vs. T Rowe Price | Wasatch Small vs. HUMANA INC | Wasatch Small vs. Aquagold International | Wasatch Small vs. Barloworld Ltd ADR |
| American Funds vs. Vanguard Target Retirement | American Funds vs. Vanguard Target Retirement | American Funds vs. Vanguard Target Retirement | American Funds vs. Vanguard Target Retirement |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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