Correlation Between Saat Servative and Stet Intermediate

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

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

Diversification Opportunities for Saat Servative and Stet Intermediate

0.83

Correlation Coefficient

Saat Servative  Stet Intermediate

Very poor diversification

The 3 months correlation between Saat and Stet is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Saat Servative Strategy 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 Saat Servative 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 Servative Strategy 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 Saat Servative i.e., Saat Servative and Stet Intermediate go up and down completely randomly.

Pair Corralation between Saat Servative and Stet Intermediate

Assuming the 90 days horizon Saat Servative Strategy is expected to generate 0.74 times more return on investment than Stet Intermediate. However, Saat Servative Strategy is 1.35 times less risky than Stet Intermediate. It trades about -0.01 of its potential returns per unit of risk. Stet Intermediate Term is currently generating about -0.04 per unit of risk. If you would invest  1,055  in Saat Servative Strategy on September 17, 2024 and sell it today you would lose (1.00) from holding Saat Servative Strategy or give up 0.09% of portfolio value over 90 days.

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

Saat Servative Strategy  vs.  Stet Intermediate Term

Saat Servative Strategy

Risk-Adjusted Performance

0 of 100

Very Weak

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

The main advantage of trading using opposite Saat Servative and Stet Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Saat Servative 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 Saat Servative Strategy 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.