Correlation Between Balanced Fund and Siit Emerging

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

By analyzing existing cross correlation between Balanced Fund Retail and Siit Emerging Markets, you can compare the effects of market volatilities on Balanced Fund and Siit Emerging 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 Balanced Fund with a short position of Siit Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Fund and Siit Emerging.

Diversification Opportunities for Balanced Fund and Siit Emerging

0.81

Correlation Coefficient

Balanced Fund  Siit Emerging

Very poor diversification

The 3 months correlation between Balanced and Siit is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Retail and Siit Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siit Emerging Markets and Balanced Fund 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 Balanced Fund Retail are associated (or correlated) with Siit Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siit Emerging Markets has no effect on the direction of Balanced Fund i.e., Balanced Fund and Siit Emerging go up and down completely randomly.

Pair Corralation between Balanced Fund and Siit Emerging

Assuming the 90 days horizon Balanced Fund is expected to generate 1.32 times less return on investment than Siit Emerging. But when comparing it to its historical volatility, Balanced Fund Retail is 1.03 times less risky than Siit Emerging. It trades about 0.03 of its potential returns per unit of risk. Siit Emerging Markets is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  817.00  in Siit Emerging Markets on October 23, 2024 and sell it today you would earn a total of  114.00  from holding Siit Emerging Markets or generate 13.95% return on investment over 90 days.

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

Balanced Fund Retail  vs.  Siit Emerging Markets

Balanced Fund Retail

Risk-Adjusted Performance

0 of 100

Very Weak

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

Siit Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Balanced Fund and Siit Emerging

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

The idea behind Balanced Fund Retail and Siit Emerging Markets 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.