Correlation Between Sit International and Stet Intermediate

Can any of the company-specific risk be diversified away by investing in both Sit International and Stet Intermediate 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 Stet Intermediate 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 Stet Intermediate Term, you can compare the effects of market volatilities on Sit International and Stet Intermediate 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 Stet Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sit International and Stet Intermediate.

Diversification Opportunities for Sit International and Stet Intermediate

0.38

Correlation Coefficient

Sit International  Stet Intermediate

Weak diversification

The 3 months correlation between Sit and Stet is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Sit International Equity and Stet Intermediate Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stet Intermediate Term 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 Stet Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stet Intermediate Term has no effect on the direction of Sit International i.e., Sit International and Stet Intermediate go up and down completely randomly.

Pair Corralation between Sit International and Stet Intermediate

Assuming the 90 days horizon Sit International Equity is expected to under-perform the Stet Intermediate. In addition to that, Sit International is 11.51 times more volatile than Stet Intermediate Term. It trades about -0.17 of its total potential returns per unit of risk. Stet Intermediate Term is currently generating about 0.0 per unit of volatility. If you would invest  1,111  in Stet Intermediate Term on September 18, 2024 and sell it today you would earn a total of  0.00  from holding Stet Intermediate Term or generate 0.0% return on investment over 90 days.

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

Sit International Equity  vs.  Stet Intermediate Term

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 latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Stet Intermediate Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stet Intermediate Term has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Stet Intermediate 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 Stet Intermediate

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

The idea behind Sit International Equity and Stet Intermediate Term 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .