Correlation Between Wasatch Frontier and Frontier Markets

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

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

Diversification Opportunities for Wasatch Frontier and Frontier Markets

0.41

Correlation Coefficient

Wasatch Frontier  Frontier Markets

Very weak diversification

The 3 months correlation between Wasatch and Frontier is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Frontier Emerging and Frontier Markets Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Markets Por and Wasatch Frontier 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 Frontier Emerging are associated (or correlated) with Frontier Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Markets Por has no effect on the direction of Wasatch Frontier i.e., Wasatch Frontier and Frontier Markets go up and down completely randomly.

Pair Corralation between Wasatch Frontier and Frontier Markets

Assuming the 90 days horizon Wasatch Frontier Emerging is expected to under-perform the Frontier Markets. In addition to that, Wasatch Frontier is 1.35 times more volatile than Frontier Markets Portfolio. It trades about -0.08 of its total potential returns per unit of risk. Frontier Markets Portfolio is currently generating about -0.01 per unit of volatility. If you would invest  1,675  in Frontier Markets Portfolio on September 17, 2024 and sell it today you would lose (7.00) from holding Frontier Markets Portfolio or give up 0.42% of portfolio value over 90 days.

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

Wasatch Frontier Emerging  vs.  Frontier Markets Portfolio

Wasatch Frontier Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

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

Frontier Markets Por

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Frontier Markets Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Frontier Markets 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 Frontier and Frontier Markets

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

The idea behind Wasatch Frontier Emerging and Frontier Markets Portfolio 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.