Correlation Between Wasatch Small and Vanguard Target

Can any of the company-specific risk be diversified away by investing in both Wasatch Small and Vanguard Target 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 Vanguard Target 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 Vanguard Target Retirement, you can compare the effects of market volatilities on Wasatch Small and Vanguard Target 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 Vanguard Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wasatch Small and Vanguard Target.

Diversification Opportunities for Wasatch Small and Vanguard Target

0.49

Correlation Coefficient

Wasatch Small  Vanguard Target

Very weak diversification

The 3 months correlation between Wasatch and Vanguard is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Small Cap and Vanguard Target Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Target Reti 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 Vanguard Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Target Reti has no effect on the direction of Wasatch Small i.e., Wasatch Small and Vanguard Target go up and down completely randomly.

Pair Corralation between Wasatch Small and Vanguard Target

Assuming the 90 days horizon Wasatch Small Cap is expected to under-perform the Vanguard Target. In addition to that, Wasatch Small is 5.09 times more volatile than Vanguard Target Retirement. It trades about -0.05 of its total potential returns per unit of risk. Vanguard Target Retirement is currently generating about 0.09 per unit of volatility. If you would invest  2,470  in Vanguard Target Retirement on September 15, 2024 and sell it today you would earn a total of  60.00  from holding Vanguard Target Retirement or generate 2.43% return on investment over 90 days.

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

Wasatch Small Cap  vs.  Vanguard Target Retirement

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 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.

Vanguard Target Reti

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Target Retirement are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Vanguard Target 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 Small and Vanguard Target

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

The idea behind Wasatch Small Cap and Vanguard Target Retirement 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.