Correlation Between Fam Value and Simt Us

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

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

Diversification Opportunities for Fam Value and Simt Us

0.98

Correlation Coefficient

Fam Value  Simt Us

Almost no diversification

The 3 months correlation between Fam and Simt is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Fam Value Fund and Simt Managed Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simt Managed Volatility and Fam Value 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 Fam Value Fund are associated (or correlated) with Simt Us. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simt Managed Volatility has no effect on the direction of Fam Value i.e., Fam Value and Simt Us go up and down completely randomly.

Pair Corralation between Fam Value and Simt Us

Assuming the 90 days horizon Fam Value Fund is expected to generate 1.42 times more return on investment than Simt Us. However, Fam Value is 1.42 times more volatile than Simt Managed Volatility. It trades about 0.2 of its potential returns per unit of risk. Simt Managed Volatility is currently generating about 0.19 per unit of risk. If you would invest  10,175  in Fam Value Fund on September 5, 2024 and sell it today you would earn a total of  1,100  from holding Fam Value Fund or generate 10.81% return on investment over 90 days.

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

Fam Value Fund  vs.  Simt Managed Volatility

Fam Value Fund

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fam Value Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fam Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Simt Managed Volatility

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Simt Managed Volatility are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Simt Us may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fam Value and Simt Us

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

The idea behind Fam Value Fund and Simt Managed Volatility 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.