Correlation Between Simt Managed and Siit Large

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

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

Diversification Opportunities for Simt Managed and Siit Large

0.95

Correlation Coefficient

Simt Managed  Siit Large

Almost no diversification

The 3 months correlation between Simt and Siit is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Simt Managed Volatility and Siit Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siit Large Cap and Simt Managed 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 Managed Volatility are associated (or correlated) with Siit Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siit Large Cap has no effect on the direction of Simt Managed i.e., Simt Managed and Siit Large go up and down completely randomly.

Pair Corralation between Simt Managed and Siit Large

Assuming the 90 days horizon Simt Managed is expected to generate 1.98 times less return on investment than Siit Large. But when comparing it to its historical volatility, Simt Managed Volatility is 1.18 times less risky than Siit Large. It trades about 0.13 of its potential returns per unit of risk. Siit Large Cap is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  21,185  in Siit Large Cap on September 13, 2024 and sell it today you would earn a total of  1,952  from holding Siit Large Cap or generate 9.21% return on investment over 90 days.

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

Simt Managed Volatility  vs.  Siit Large Cap

Simt Managed Volatility

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Simt Managed Volatility are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Simt Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Siit Large Cap

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Siit Large Cap are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Siit Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Simt Managed and Siit Large

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

The idea behind Simt Managed Volatility and Siit 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.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.