Correlation Between Sit International and Federated Institutional

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

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

Diversification Opportunities for Sit International and Federated Institutional

0.05

Correlation Coefficient

Sit International  Federated Institutional

Significant diversification

The 3 months correlation between Sit and Federated is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Sit International Equity and Federated Institutional High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Institutional and Sit International 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 Sit International Equity are associated (or correlated) with Federated Institutional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Institutional has no effect on the direction of Sit International i.e., Sit International and Federated Institutional go up and down completely randomly.

Pair Corralation between Sit International and Federated Institutional

Assuming the 90 days horizon Sit International Equity is expected to generate 2.6 times more return on investment than Federated Institutional. However, Sit International is 2.6 times more volatile than Federated Institutional High. It trades about 0.07 of its potential returns per unit of risk. Federated Institutional High is currently generating about 0.12 per unit of risk. If you would invest  982.00  in Sit International Equity on September 16, 2024 and sell it today you would earn a total of  292.00  from holding Sit International Equity or generate 29.74% return on investment over 90 days.

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

Sit International Equity  vs.  Federated Institutional High

Sit International Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sit International Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Sit International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Institutional

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Institutional High are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Federated Institutional is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sit International and Federated Institutional

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

The idea behind Sit International Equity and Federated Institutional High 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.