Correlation Between Wasatch Small and Kensington Managed
Can any of the company-specific risk be diversified away by investing in both Wasatch Small and Kensington Managed 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 Kensington Managed 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 Kensington Managed Income, you can compare the effects of market volatilities on Wasatch Small and Kensington Managed 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 Kensington Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wasatch Small and Kensington Managed.
Diversification Opportunities for Wasatch Small and Kensington Managed
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Wasatch and Kensington is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Small Cap and Kensington Managed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kensington Managed Income 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 Kensington Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kensington Managed Income has no effect on the direction of Wasatch Small i.e., Wasatch Small and Kensington Managed go up and down completely randomly.
Pair Corralation between Wasatch Small and Kensington Managed
Assuming the 90 days horizon Wasatch Small Cap is expected to under-perform the Kensington Managed. In addition to that, Wasatch Small is 6.81 times more volatile than Kensington Managed Income. It trades about -0.06 of its total potential returns per unit of risk. Kensington Managed Income is currently generating about 0.37 per unit of volatility. If you would invest 989.00 in Kensington Managed Income on September 13, 2024 and sell it today you would earn a total of 9.00 from holding Kensington Managed Income or generate 0.91% 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. Kensington Managed Income
Performance |
| Timeline |
| Wasatch Small Cap |
| Kensington Managed Income |
Wasatch Small and Kensington Managed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wasatch Small and Kensington Managed
The main advantage of trading using opposite Wasatch Small and Kensington Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wasatch Small position performs unexpectedly, Kensington Managed 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 Kensington Managed will offset losses from the drop in Kensington Managed's long position.| Wasatch Small vs. Highland Longshort Healthcare | Wasatch Small vs. The Gabelli Healthcare | Wasatch Small vs. Blackrock Health Sciences | Wasatch Small vs. Baillie Gifford Health |
| Kensington Managed vs. Spectrum Advisors Preferred | Kensington Managed vs. Ontrack E Fund | Kensington Managed vs. Ontrack E Fund | Kensington Managed vs. Spectrum Unconstrained |
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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