Correlation Between Wasatch Small and Inverse Sp

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

By analyzing existing cross correlation between Wasatch Small Cap and Inverse Sp 500, you can compare the effects of market volatilities on Wasatch Small and Inverse Sp 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 Small with a short position of Inverse Sp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wasatch Small and Inverse Sp.

Diversification Opportunities for Wasatch Small and Inverse Sp

0.55

Correlation Coefficient

Wasatch Small  Inverse Sp

Very weak diversification

The 3 months correlation between Wasatch and Inverse is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Small Cap and Inverse Sp 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Sp 500 and Wasatch Small 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 Small Cap are associated (or correlated) with Inverse Sp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Sp 500 has no effect on the direction of Wasatch Small i.e., Wasatch Small and Inverse Sp go up and down completely randomly.

Pair Corralation between Wasatch Small and Inverse Sp

Assuming the 90 days horizon Wasatch Small Cap is expected to under-perform the Inverse Sp. In addition to that, Wasatch Small is 1.98 times more volatile than Inverse Sp 500. It trades about -0.1 of its total potential returns per unit of risk. Inverse Sp 500 is currently generating about -0.13 per unit of volatility. If you would invest  2,165  in Inverse Sp 500 on September 29, 2024 and sell it today you would lose (199.00) from holding Inverse Sp 500 or give up 9.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Wasatch Small Cap  vs.  Inverse Sp 500

Wasatch Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wasatch Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Inverse Sp 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inverse Sp 500 has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Wasatch Small and Inverse Sp

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

The idea behind Wasatch Small Cap and Inverse Sp 500 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.