Correlation Between Simt Small and Sit International

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

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

Diversification Opportunities for Simt Small and Sit International

-0.55

Correlation Coefficient

Simt Small  Sit International

Excellent diversification

The 3 months correlation between Simt and Sit is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Simt Small Cap and Sit International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit International Equity and Simt Small 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 Simt Small Cap are associated (or correlated) with Sit International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit International Equity has no effect on the direction of Simt Small i.e., Simt Small and Sit International go up and down completely randomly.

Pair Corralation between Simt Small and Sit International

Assuming the 90 days horizon Simt Small Cap is expected to generate 1.63 times more return on investment than Sit International. However, Simt Small is 1.63 times more volatile than Sit International Equity. It trades about 0.05 of its potential returns per unit of risk. Sit International Equity is currently generating about 0.06 per unit of risk. If you would invest  2,434  in Simt Small Cap on September 14, 2024 and sell it today you would earn a total of  350.00  from holding Simt Small Cap or generate 14.38% return on investment over 90 days.

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

Simt Small Cap  vs.  Sit International Equity

Simt Small Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Simt Small Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Simt Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 basic indicators, Sit International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Simt Small and Sit International

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

The idea behind Simt Small Cap and Sit International Equity 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 Transaction History module to view history of all your transactions and understand their impact on performance.