Correlation Between American Funds and Sit Emerging

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Can any of the company-specific risk be diversified away by investing in both American Funds and Sit Emerging 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 American Funds and Sit Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Inflation and Sit Emerging Markets, you can compare the effects of market volatilities on American Funds and Sit Emerging 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 American Funds with a short position of Sit Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Sit Emerging.

Diversification Opportunities for American Funds and Sit Emerging

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between American and Sit is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Inflation and Sit Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit Emerging Markets and American Funds 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 American Funds Inflation are associated (or correlated) with Sit Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit Emerging Markets has no effect on the direction of American Funds i.e., American Funds and Sit Emerging go up and down completely randomly.

Pair Corralation between American Funds and Sit Emerging

Assuming the 90 days horizon American Funds Inflation is expected to under-perform the Sit Emerging. But the mutual fund apears to be less risky and, when comparing its historical volatility, American Funds Inflation is 1.24 times less risky than Sit Emerging. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Sit Emerging Markets is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  878.00  in Sit Emerging Markets on September 11, 2024 and sell it today you would earn a total of  3.00  from holding Sit Emerging Markets or generate 0.34% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

American Funds Inflation  vs.  Sit Emerging Markets

 Performance 
       Timeline  
American Funds Inflation 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days American Funds Inflation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Sit Emerging Markets 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Sit Emerging Markets 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, Sit Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Funds and Sit Emerging Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Funds and Sit Emerging

The main advantage of trading using opposite American Funds and Sit Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Sit Emerging 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 Sit Emerging will offset losses from the drop in Sit Emerging's long position.
The idea behind American Funds Inflation and Sit Emerging Markets 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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