Correlation Between Dana Large and Siit Ultra

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

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

Diversification Opportunities for Dana Large and Siit Ultra

0.8

Correlation Coefficient

Dana Large  Siit Ultra

Very poor diversification

The 3 months correlation between Dana and Siit is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Dana Large Cap and Siit Ultra Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siit Ultra Short and Dana 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 Dana Large Cap are associated (or correlated) with Siit Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siit Ultra Short has no effect on the direction of Dana Large i.e., Dana Large and Siit Ultra go up and down completely randomly.

Pair Corralation between Dana Large and Siit Ultra

Assuming the 90 days horizon Dana Large Cap is expected to generate 7.91 times more return on investment than Siit Ultra. However, Dana Large is 7.91 times more volatile than Siit Ultra Short. It trades about 0.11 of its potential returns per unit of risk. Siit Ultra Short is currently generating about 0.22 per unit of risk. If you would invest  1,758  in Dana Large Cap on September 19, 2024 and sell it today you would earn a total of  942.00  from holding Dana Large Cap or generate 53.58% return on investment over 90 days.

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

Dana Large Cap  vs.  Siit Ultra Short

Dana Large Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dana Large Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Dana Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Siit Ultra Short

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Siit Ultra Short are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Siit Ultra is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dana Large and Siit Ultra

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

The idea behind Dana Large Cap and Siit Ultra Short 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.

Check out your portfolio center.

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 Global Correlations module to find global opportunities by holding instruments from different markets.