Correlation Between Fulcrum Diversified and Sit Small

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

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

Diversification Opportunities for Fulcrum Diversified and Sit Small

0.76

Correlation Coefficient

Fulcrum Diversified  Sit Small

Poor diversification

The 3 months correlation between Fulcrum and Sit is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Fulcrum Diversified Absolute and Sit Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit Small Cap and Fulcrum Diversified 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 Fulcrum Diversified Absolute are associated (or correlated) with Sit Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit Small Cap has no effect on the direction of Fulcrum Diversified i.e., Fulcrum Diversified and Sit Small go up and down completely randomly.

Pair Corralation between Fulcrum Diversified and Sit Small

Assuming the 90 days horizon Fulcrum Diversified Absolute is expected to under-perform the Sit Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Fulcrum Diversified Absolute is 3.42 times less risky than Sit Small. The mutual fund trades about 0.0 of its potential returns per unit of risk. The Sit Small Cap is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  7,026  in Sit Small Cap on October 25, 2024 and sell it today you would lose (20.00) from holding Sit Small Cap or give up 0.28% of portfolio value over 90 days.

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

Fulcrum Diversified Absolute  vs.  Sit Small Cap

Fulcrum Diversified

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fulcrum Diversified Absolute has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Fulcrum Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sit Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sit Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Sit Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fulcrum Diversified and Sit Small

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

The idea behind Fulcrum Diversified Absolute and Sit Small 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.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.