Correlation Between Wasatch Greater and Kennedy Capital

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

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

Diversification Opportunities for Wasatch Greater and Kennedy Capital

-0.1

Correlation Coefficient

Wasatch Greater  Kennedy Capital

Good diversification

The 3 months correlation between Wasatch and Kennedy is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Greater China and Kennedy Capital Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kennedy Capital Small and Wasatch Greater 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 Greater China are associated (or correlated) with Kennedy Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kennedy Capital Small has no effect on the direction of Wasatch Greater i.e., Wasatch Greater and Kennedy Capital go up and down completely randomly.

Pair Corralation between Wasatch Greater and Kennedy Capital

Assuming the 90 days horizon Wasatch Greater China is expected to generate 1.56 times more return on investment than Kennedy Capital. However, Wasatch Greater is 1.56 times more volatile than Kennedy Capital Small. It trades about 0.09 of its potential returns per unit of risk. Kennedy Capital Small is currently generating about -0.03 per unit of risk. 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

Wasatch Greater China  vs.  Kennedy Capital Small

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.

Kennedy Capital Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kennedy Capital Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Kennedy Capital 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 Greater and Kennedy Capital

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

The idea behind Wasatch Greater China and Kennedy Capital Small 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.