Correlation Between Embark Small and Siit Ultra

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

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

Diversification Opportunities for Embark Small and Siit Ultra

-0.7

Correlation Coefficient

Embark Small  Siit Ultra

Excellent diversification

The 3 months correlation between Embark and Siit is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Embark Small Cap and Siit Ultra Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siit Ultra Short and Embark Small 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 Embark Small Cap are associated (or correlated) with Siit Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siit Ultra Short has no effect on the direction of Embark Small i.e., Embark Small and Siit Ultra go up and down completely randomly.

Pair Corralation between Embark Small and Siit Ultra

Assuming the 90 days horizon Embark Small Cap is expected to under-perform the Siit Ultra. In addition to that, Embark Small is 11.98 times more volatile than Siit Ultra Short. It trades about -0.1 of its total potential returns per unit of risk. Siit Ultra Short is currently generating about 0.2 per unit of volatility. If you would invest  984.00  in Siit Ultra Short on December 28, 2024 and sell it today you would earn a total of  12.00  from holding Siit Ultra Short or generate 1.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Embark Small Cap  vs.  Siit Ultra Short

Embark Small Cap

Risk-Adjusted Performance

Very Weak

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

Siit Ultra Short

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Siit Ultra Short are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Siit Ultra is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Embark Small and Siit Ultra

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

The idea behind Embark Small Cap and Siit Ultra Short 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.