Correlation Between Kennedy Capital and Wasatch Greater

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

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

Diversification Opportunities for Kennedy Capital and Wasatch Greater

-0.08

Correlation Coefficient

Kennedy Capital  Wasatch Greater

Good diversification

The 3 months correlation between Kennedy and Wasatch is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Kennedy Capital Small and Wasatch Greater China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Greater China and Kennedy Capital 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 Kennedy Capital Small are associated (or correlated) with Wasatch Greater. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Greater China has no effect on the direction of Kennedy Capital i.e., Kennedy Capital and Wasatch Greater go up and down completely randomly.

Pair Corralation between Kennedy Capital and Wasatch Greater

Assuming the 90 days horizon Kennedy Capital is expected to generate 6.35 times less return on investment than Wasatch Greater. But when comparing it to its historical volatility, Kennedy Capital Small is 1.66 times less risky than Wasatch Greater. It trades about 0.02 of its potential returns per unit of risk. Wasatch Greater China is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  416.00  in Wasatch Greater China on September 20, 2024 and sell it today you would earn a total of  50.00  from holding Wasatch Greater China or generate 12.02% return on investment over 90 days.

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

Kennedy Capital Small  vs.  Wasatch Greater China

Kennedy Capital Small

Risk-Adjusted Performance

1 of 100

Weak

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

Wasatch Greater China

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wasatch Greater China are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Wasatch Greater showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kennedy Capital and Wasatch Greater

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

The idea behind Kennedy Capital Small and Wasatch Greater China 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.