Correlation Between Simt Small and Stet Short

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

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

Diversification Opportunities for Simt Small and Stet Short

0.47

Correlation Coefficient

Simt Small  Stet Short

Very weak diversification

The 3 months correlation between Simt and Stet is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Simt Small Cap and Stet Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stet Short Duration and Simt Small 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 Small Cap are associated (or correlated) with Stet Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stet Short Duration has no effect on the direction of Simt Small i.e., Simt Small and Stet Short go up and down completely randomly.

Pair Corralation between Simt Small and Stet Short

Assuming the 90 days horizon Simt Small Cap is expected to generate 16.17 times more return on investment than Stet Short. However, Simt Small is 16.17 times more volatile than Stet Short Duration. It trades about 0.04 of its potential returns per unit of risk. Stet Short Duration is currently generating about 0.16 per unit of risk. If you would invest  2,859  in Simt Small Cap on September 20, 2024 and sell it today you would earn a total of  709.00  from holding Simt Small Cap or generate 24.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Simt Small Cap  vs.  Stet Short Duration

Simt Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Stet Short Duration

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stet Short Duration are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Stet Short 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 Small and Stet Short

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

The idea behind Simt Small Cap and Stet Short Duration 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.