Correlation Between Sit International and Sit Small

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

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

Diversification Opportunities for Sit International and Sit Small

-0.19

Correlation Coefficient

Sit International  Sit Small

Good diversification

The 3 months correlation between Sit and Sit is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Sit International Growth and Sit Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit Small Cap 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 Growth are associated (or correlated) with Sit Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit Small Cap has no effect on the direction of Sit International i.e., Sit International and Sit Small go up and down completely randomly.

Pair Corralation between Sit International and Sit Small

Assuming the 90 days horizon Sit International Growth is expected to generate 0.77 times more return on investment than Sit Small. However, Sit International Growth is 1.29 times less risky than Sit Small. It trades about -0.01 of its potential returns per unit of risk. Sit Small Cap is currently generating about -0.2 per unit of risk. If you would invest  2,285  in Sit International Growth on September 12, 2024 and sell it today you would lose (5.00) from holding Sit International Growth or give up 0.22% of portfolio value over 90 days.

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

Sit International Growth  vs.  Sit Small Cap

Sit International Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sit International Growth 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.

Sit Small Cap

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Sit International and Sit Small

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

The idea behind Sit International Growth and Sit Small Cap 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.