Correlation Between Sit Balanced and Value Fund

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

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

Diversification Opportunities for Sit Balanced and Value Fund

0.89

Correlation Coefficient

Sit Balanced  Value Fund

Very poor diversification

The 3 months correlation between Sit and Value is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Sit Balanced Fund and Value Fund Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Fund Value and Sit 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 Sit Balanced Fund are associated (or correlated) with Value Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Fund Value has no effect on the direction of Sit Balanced i.e., Sit Balanced and Value Fund go up and down completely randomly.

Pair Corralation between Sit Balanced and Value Fund

Assuming the 90 days horizon Sit Balanced is expected to generate 1.0 times less return on investment than Value Fund. But when comparing it to its historical volatility, Sit Balanced Fund is 1.43 times less risky than Value Fund. It trades about 0.19 of its potential returns per unit of risk. Value Fund Value is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  5,709  in Value Fund Value on September 5, 2024 and sell it today you would earn a total of  374.00  from holding Value Fund Value or generate 6.55% return on investment over 90 days.

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

Sit Balanced Fund  vs.  Value Fund Value

Sit Balanced

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sit Balanced Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Sit Balanced may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Value Fund Value

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Value Fund Value are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Value Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sit Balanced and Value Fund

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

The idea behind Sit Balanced Fund and Value Fund Value 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.