Correlation Between Wasatch Micro and Wasatch Emerging

Can any of the company-specific risk be diversified away by investing in both Wasatch Micro 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 Micro 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 Micro Cap and Wasatch Emerging India, you can compare the effects of market volatilities on Wasatch Micro 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 Micro with a short position of Wasatch Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wasatch Micro and Wasatch Emerging.

Diversification Opportunities for Wasatch Micro and Wasatch Emerging

-0.26

Correlation Coefficient

Wasatch Micro  Wasatch Emerging

Very good diversification

The 3 months correlation between Wasatch and Wasatch is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Micro Cap and Wasatch Emerging India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Emerging India and Wasatch Micro 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 Micro Cap 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 India has no effect on the direction of Wasatch Micro i.e., Wasatch Micro and Wasatch Emerging go up and down completely randomly.

Pair Corralation between Wasatch Micro and Wasatch Emerging

Assuming the 90 days horizon Wasatch Micro Cap is expected to generate 1.21 times more return on investment than Wasatch Emerging. However, Wasatch Micro is 1.21 times more volatile than Wasatch Emerging India. It trades about 0.3 of its potential returns per unit of risk. Wasatch Emerging India is currently generating about 0.05 per unit of risk. If you would invest  338.00  in Wasatch Micro Cap on February 13, 2024 and sell it today you would earn a total of  16.00  from holding Wasatch Micro Cap or generate 4.73% return on investment over 90 days.

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

Wasatch Micro Cap  vs.  Wasatch Emerging India

Wasatch Micro Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wasatch Micro Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Wasatch Micro is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wasatch Emerging India

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wasatch Emerging India are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic 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 Micro and Wasatch Emerging

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

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.