Correlation Between Simt Tax and Stet Intermediate

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

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

Diversification Opportunities for Simt Tax and Stet Intermediate

0.1

Correlation Coefficient

Simt Tax  Stet Intermediate

Average diversification

The 3 months correlation between Simt and Stet is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Simt Tax Managed Large 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 Simt Tax 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 Tax Managed Large 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 Simt Tax i.e., Simt Tax and Stet Intermediate go up and down completely randomly.

Pair Corralation between Simt Tax and Stet Intermediate

Assuming the 90 days horizon Simt Tax Managed Large is expected to under-perform the Stet Intermediate. In addition to that, Simt Tax is 5.56 times more volatile than Stet Intermediate Term. It trades about -0.05 of its total potential returns per unit of risk. Stet Intermediate Term is currently generating about -0.06 per unit of volatility. If you would invest  1,120  in Stet Intermediate Term on September 18, 2024 and sell it today you would lose (9.00) from holding Stet Intermediate Term or give up 0.8% of portfolio value over 90 days.

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

Simt Tax Managed Large  vs.  Stet Intermediate Term

Simt Tax Managed

Risk-Adjusted Performance

0 of 100

OK

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

The main advantage of trading using opposite Simt Tax and Stet Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simt Tax 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 Simt Tax Managed Large 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.