Correlation Between American Funds and Sit Emerging

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

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

Diversification Opportunities for American Funds and Sit Emerging

0.94

Correlation Coefficient

American Funds  Sit Emerging

Almost no diversification

The 3 months correlation between American and Sit is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding American Funds New and Sit Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit Emerging Markets and American Funds 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 American Funds New are associated (or correlated) with Sit Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit Emerging Markets has no effect on the direction of American Funds i.e., American Funds and Sit Emerging go up and down completely randomly.

Pair Corralation between American Funds and Sit Emerging

Assuming the 90 days horizon American Funds New is expected to generate 0.88 times more return on investment than Sit Emerging. However, American Funds New is 1.13 times less risky than Sit Emerging. It trades about 0.04 of its potential returns per unit of risk. Sit Emerging Markets is currently generating about 0.02 per unit of risk. If you would invest  6,890  in American Funds New on October 21, 2024 and sell it today you would earn a total of  857.00  from holding American Funds New or generate 12.44% return on investment over 90 days.

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

American Funds New  vs.  Sit Emerging Markets

American Funds New

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Funds New 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.

Sit Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sit Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Sit 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 American Funds and Sit Emerging

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

The idea behind American Funds New and Sit 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..