Correlation Between Plumb Balanced and Sit Balanced

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

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

Diversification Opportunities for Plumb Balanced and Sit Balanced

0.97

Correlation Coefficient

Plumb Balanced  Sit Balanced

Almost no diversification

The 3 months correlation between Plumb and Sit is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Plumb Balanced Fund and Sit Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit Balanced and Plumb Balanced 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 Plumb Balanced Fund are associated (or correlated) with Sit Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit Balanced has no effect on the direction of Plumb Balanced i.e., Plumb Balanced and Sit Balanced go up and down completely randomly.

Pair Corralation between Plumb Balanced and Sit Balanced

Assuming the 90 days horizon Plumb Balanced is expected to generate 2.07 times less return on investment than Sit Balanced. In addition to that, Plumb Balanced is 1.06 times more volatile than Sit Balanced Fund. It trades about 0.07 of its total potential returns per unit of risk. Sit Balanced Fund is currently generating about 0.15 per unit of volatility. If you would invest  3,622  in Sit Balanced Fund on September 13, 2024 and sell it today you would earn a total of  57.00  from holding Sit Balanced Fund or generate 1.57% return on investment over 90 days.

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

Plumb Balanced Fund  vs.  Sit Balanced Fund

Plumb Balanced

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Plumb Balanced Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Plumb Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sit Balanced

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sit Balanced Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Sit Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Plumb Balanced and Sit Balanced

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

The idea behind Plumb Balanced Fund and Sit Balanced Fund 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.