Correlation Between Wasatch Large and Guidemark Large

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

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

Diversification Opportunities for Wasatch Large and Guidemark Large

0.65

Correlation Coefficient

Wasatch Large  Guidemark Large

Poor diversification

The 3 months correlation between Wasatch and Guidemark is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Large Cap and Guidemark Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidemark Large Cap and Wasatch Large 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 Large Cap are associated (or correlated) with Guidemark Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidemark Large Cap has no effect on the direction of Wasatch Large i.e., Wasatch Large and Guidemark Large go up and down completely randomly.

Pair Corralation between Wasatch Large and Guidemark Large

Assuming the 90 days horizon Wasatch Large is expected to generate 1.56 times less return on investment than Guidemark Large. But when comparing it to its historical volatility, Wasatch Large Cap is 1.12 times less risky than Guidemark Large. It trades about 0.35 of its potential returns per unit of risk. Guidemark Large Cap is currently generating about 0.49 of returns per unit of risk over similar time horizon. If you would invest  1,064  in Guidemark Large Cap on February 8, 2025 and sell it today you would earn a total of  105.00  from holding Guidemark Large Cap or generate 9.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Wasatch Large Cap  vs.  Guidemark Large Cap

Wasatch Large Cap

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wasatch Large Cap are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Wasatch Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Guidemark Large Cap

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guidemark Large Cap are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Guidemark Large 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 Large and Guidemark Large

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

The idea behind Wasatch Large Cap and Guidemark Large Cap 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.