Correlation Between Virtus Kar and Wasatch Micro

Can any of the company-specific risk be diversified away by investing in both Virtus Kar 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 Virtus Kar and Wasatch Micro into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Virtus Kar Small Cap and Wasatch Micro Cap, you can compare the effects of market volatilities on Virtus Kar 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 Virtus Kar with a short position of Wasatch Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus Kar and Wasatch Micro.

Diversification Opportunities for Virtus Kar and Wasatch Micro

0.8

Correlation Coefficient

Virtus Kar  Wasatch Micro

Very poor diversification

The 3 months correlation between Virtus and Wasatch is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Kar Small Cap 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 Virtus Kar 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 Virtus Kar Small Cap 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 Virtus Kar i.e., Virtus Kar and Wasatch Micro go up and down completely randomly.

Pair Corralation between Virtus Kar and Wasatch Micro

Assuming the 90 days horizon Virtus Kar Small Cap is expected to under-perform the Wasatch Micro. But the mutual fund apears to be less risky and, when comparing its historical volatility, Virtus Kar Small Cap is 1.33 times less risky than Wasatch Micro. The mutual fund trades about -0.14 of its potential returns per unit of risk. The Wasatch Micro Cap is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  731.00  in Wasatch Micro Cap on March 11, 2024 and sell it today you would earn a total of  5.00  from holding Wasatch Micro Cap or generate 0.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Virtus Kar Small Cap  vs.  Wasatch Micro Cap

Virtus Kar Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virtus Kar Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Virtus Kar is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wasatch Micro Cap

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wasatch Micro Cap are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Wasatch Micro is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Virtus Kar and Wasatch Micro

The main advantage of trading using opposite Virtus Kar and Wasatch Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virtus Kar 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.

The idea behind Virtus Kar Small Cap and Wasatch Micro Cap pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.