Correlation Between SIL Investments and Investment Trust

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

By analyzing existing cross correlation between SIL Investments Limited and The Investment Trust, you can compare the effects of market volatilities on SIL Investments and Investment Trust 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 SIL Investments with a short position of Investment Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIL Investments and Investment Trust.

Diversification Opportunities for SIL Investments and Investment Trust

0.62

Correlation Coefficient

SIL Investments  Investment Trust

Poor diversification

The 3 months correlation between SIL and Investment is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding SIL Investments Limited and The Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Trust and SIL Investments 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 SIL Investments Limited are associated (or correlated) with Investment Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Trust has no effect on the direction of SIL Investments i.e., SIL Investments and Investment Trust go up and down completely randomly.

Pair Corralation between SIL Investments and Investment Trust

Assuming the 90 days trading horizon SIL Investments Limited is expected to generate 1.65 times more return on investment than Investment Trust. However, SIL Investments is 1.65 times more volatile than The Investment Trust. It trades about 0.11 of its potential returns per unit of risk. The Investment Trust is currently generating about 0.1 per unit of risk. If you would invest  57,320  in SIL Investments Limited on September 12, 2024 and sell it today you would earn a total of  15,495  from holding SIL Investments Limited or generate 27.03% return on investment over 90 days.

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

SIL Investments Limited  vs.  The Investment Trust

SIL Investments

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SIL Investments Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting forward indicators, SIL Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

Investment Trust

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Investment Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Investment Trust exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SIL Investments and Investment Trust

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

The idea behind SIL Investments Limited and The Investment Trust 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.