Correlation Between Wasatch International and Wasatch Core

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

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

Diversification Opportunities for Wasatch International and Wasatch Core

-0.4

Correlation Coefficient

Wasatch International  Wasatch Core

Very good diversification

The 3 months correlation between Wasatch and Wasatch is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch International Growth and Wasatch E Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch E Growth and Wasatch International 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 International Growth are associated (or correlated) with Wasatch Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch E Growth has no effect on the direction of Wasatch International i.e., Wasatch International and Wasatch Core go up and down completely randomly.

Pair Corralation between Wasatch International and Wasatch Core

Assuming the 90 days horizon Wasatch International is expected to generate 17.62 times less return on investment than Wasatch Core. But when comparing it to its historical volatility, Wasatch International Growth is 1.23 times less risky than Wasatch Core. It trades about 0.02 of its potential returns per unit of risk. Wasatch E Growth is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  9,084  in Wasatch E Growth on September 2, 2024 and sell it today you would earn a total of  1,610  from holding Wasatch E Growth or generate 17.72% return on investment over 90 days.

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

Wasatch International Growth  vs.  Wasatch E Growth

Wasatch International

Risk-Adjusted Performance

1 of 100

Weak

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

Wasatch E Growth

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wasatch E Growth are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Wasatch Core showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wasatch International and Wasatch Core

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

The idea behind Wasatch International Growth and Wasatch E Growth 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.