Correlation Between Simt Large and Simt Global

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

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

Diversification Opportunities for Simt Large and Simt Global

0.8

Correlation Coefficient

Simt Large  Simt Global

Very poor diversification

The 3 months correlation between Simt and Simt is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Simt Large Cap and Simt Global Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simt Global Managed and Simt Large 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 Large Cap are associated (or correlated) with Simt Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simt Global Managed has no effect on the direction of Simt Large i.e., Simt Large and Simt Global go up and down completely randomly.

Pair Corralation between Simt Large and Simt Global

Assuming the 90 days horizon Simt Large Cap is expected to generate 1.69 times more return on investment than Simt Global. However, Simt Large is 1.69 times more volatile than Simt Global Managed. It trades about 0.14 of its potential returns per unit of risk. Simt Global Managed is currently generating about 0.12 per unit of risk. If you would invest  2,687  in Simt Large Cap on September 5, 2024 and sell it today you would earn a total of  170.00  from holding Simt Large Cap or generate 6.33% return on investment over 90 days.

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

Simt Large Cap  vs.  Simt Global Managed

Simt Large Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Simt Large Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Simt Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Simt Global Managed

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Simt Global Managed 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 Global 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 Large and Simt Global

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

The idea behind Simt Large Cap and Simt Global Managed 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.