Correlation Between Simt Sp and Simt Large

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

By analyzing existing cross correlation between Simt Sp 500 and Simt Large Cap, you can compare the effects of market volatilities on Simt Sp and Simt Large 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 Sp with a short position of Simt Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simt Sp and Simt Large.

Diversification Opportunities for Simt Sp and Simt Large

0.99

Correlation Coefficient

Simt Sp  Simt Large

No risk reduction

The 3 months correlation between Simt and Simt is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Simt Sp 500 and Simt Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simt Large Cap and Simt Sp 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 Sp 500 are associated (or correlated) with Simt Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simt Large Cap has no effect on the direction of Simt Sp i.e., Simt Sp and Simt Large go up and down completely randomly.

Pair Corralation between Simt Sp and Simt Large

Assuming the 90 days horizon Simt Sp is expected to generate 1.0 times less return on investment than Simt Large. But when comparing it to its historical volatility, Simt Sp 500 is 1.44 times less risky than Simt Large. It trades about 0.05 of its potential returns per unit of risk. Simt Large Cap is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,957  in Simt Large Cap on September 20, 2024 and sell it today you would earn a total of  401.00  from holding Simt Large Cap or generate 10.13% return on investment over 90 days.

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

Simt Sp 500  vs.  Simt Large Cap

Simt Sp 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Simt Sp 500 has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Simt Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Simt Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Simt Sp and Simt Large

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

The idea behind Simt Sp 500 and Simt Large 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.