Correlation Between Wasatch Long/short and Wasatch Emerging

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

By analyzing existing cross correlation between Wasatch Longshort Alpha and Wasatch Emerging Markets, you can compare the effects of market volatilities on Wasatch Long/short and Wasatch Emerging 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 Long/short with a short position of Wasatch Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wasatch Long/short and Wasatch Emerging.

Diversification Opportunities for Wasatch Long/short and Wasatch Emerging

0.04

Correlation Coefficient

Wasatch Long/short  Wasatch Emerging

Significant diversification

The 3 months correlation between Wasatch and Wasatch is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Longshort Alpha and Wasatch Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Emerging Markets and Wasatch Long/short 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 Longshort Alpha are associated (or correlated) with Wasatch Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Emerging Markets has no effect on the direction of Wasatch Long/short i.e., Wasatch Long/short and Wasatch Emerging go up and down completely randomly.

Pair Corralation between Wasatch Long/short and Wasatch Emerging

Assuming the 90 days horizon Wasatch Long/short is expected to generate 3.65 times less return on investment than Wasatch Emerging. In addition to that, Wasatch Long/short is 1.02 times more volatile than Wasatch Emerging Markets. It trades about 0.03 of its total potential returns per unit of risk. Wasatch Emerging Markets is currently generating about 0.12 per unit of volatility. If you would invest  292.00  in Wasatch Emerging Markets on February 14, 2024 and sell it today you would earn a total of  5.00  from holding Wasatch Emerging Markets or generate 1.71% return on investment over 90 days.

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

Wasatch Longshort Alpha  vs.  Wasatch Emerging Markets

Wasatch Longshort Alpha

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wasatch Longshort Alpha are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Wasatch Long/short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wasatch Emerging Markets

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Wasatch Long/short and Wasatch Emerging

The main advantage of trading using opposite Wasatch Long/short and Wasatch Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wasatch Long/short position performs unexpectedly, Wasatch Emerging 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 Emerging will offset losses from the drop in Wasatch Emerging's long position.

The idea behind Wasatch Longshort Alpha and Wasatch Emerging Markets 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.