Correlation Between Saat Moderate and Sierra E

Can any of the company-specific risk be diversified away by investing in both Saat Moderate and Sierra E 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 Saat Moderate and Sierra E into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Saat Moderate Strategy and Sierra E Retirement, you can compare the effects of market volatilities on Saat Moderate and Sierra E 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 Saat Moderate with a short position of Sierra E. Check out your portfolio center. Please also check ongoing floating volatility patterns of Saat Moderate and Sierra E.

Diversification Opportunities for Saat Moderate and Sierra E

0.8

Correlation Coefficient

Saat Moderate  Sierra E

Very poor diversification

The 3 months correlation between Saat and Sierra is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Saat Moderate Strategy and Sierra E Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra E Retirement and Saat Moderate 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 Saat Moderate Strategy are associated (or correlated) with Sierra E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sierra E Retirement has no effect on the direction of Saat Moderate i.e., Saat Moderate and Sierra E go up and down completely randomly.

Pair Corralation between Saat Moderate and Sierra E

Assuming the 90 days horizon Saat Moderate Strategy is expected to generate 0.88 times more return on investment than Sierra E. However, Saat Moderate Strategy is 1.13 times less risky than Sierra E. It trades about 0.02 of its potential returns per unit of risk. Sierra E Retirement is currently generating about 0.0 per unit of risk. If you would invest  1,189  in Saat Moderate Strategy on September 14, 2024 and sell it today you would earn a total of  3.00  from holding Saat Moderate Strategy or generate 0.25% return on investment over 90 days.

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

Saat Moderate Strategy  vs.  Sierra E Retirement

Saat Moderate Strategy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Saat Moderate Strategy are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Saat Moderate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sierra E Retirement

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Saat Moderate and Sierra E

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

The idea behind Saat Moderate Strategy and Sierra E Retirement 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.