Correlation Between Simt Real and Stet Intermediate

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

By analyzing existing cross correlation between Simt Real Return and Stet Intermediate Term, you can compare the effects of market volatilities on Simt Real and Stet Intermediate 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 Real with a short position of Stet Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simt Real and Stet Intermediate.

Diversification Opportunities for Simt Real and Stet Intermediate

0.79

Correlation Coefficient

Simt Real  Stet Intermediate

Poor diversification

The 3 months correlation between Simt and Stet is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Simt Real Return and Stet Intermediate Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stet Intermediate Term and Simt Real 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 Real Return are associated (or correlated) with Stet Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stet Intermediate Term has no effect on the direction of Simt Real i.e., Simt Real and Stet Intermediate go up and down completely randomly.

Pair Corralation between Simt Real and Stet Intermediate

Assuming the 90 days horizon Simt Real is expected to generate 1.31 times less return on investment than Stet Intermediate. But when comparing it to its historical volatility, Simt Real Return is 1.89 times less risky than Stet Intermediate. It trades about 0.13 of its potential returns per unit of risk. Stet Intermediate Term is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,111  in Stet Intermediate Term on September 17, 2024 and sell it today you would earn a total of  3.00  from holding Stet Intermediate Term or generate 0.27% return on investment over 90 days.

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

Simt Real Return  vs.  Stet Intermediate Term

Simt Real Return

Risk-Adjusted Performance

0 of 100

Very Weak

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

Stet Intermediate Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stet Intermediate Term has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Stet Intermediate 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 Real and Stet Intermediate

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

The idea behind Simt Real Return and Stet Intermediate Term 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .