Correlation Between Sit Global and Sit Mid

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

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

Diversification Opportunities for Sit Global and Sit Mid

0.7

Correlation Coefficient

Sit Global  Sit Mid

Poor diversification

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

Pair Corralation between Sit Global and Sit Mid

Assuming the 90 days horizon Sit Global Dividend is expected to generate 0.61 times more return on investment than Sit Mid. However, Sit Global Dividend is 1.65 times less risky than Sit Mid. It trades about -0.04 of its potential returns per unit of risk. Sit Mid Cap is currently generating about -0.11 per unit of risk. If you would invest  2,840  in Sit Global Dividend on December 26, 2024 and sell it today you would lose (62.00) from holding Sit Global Dividend or give up 2.18% of portfolio value over 90 days.

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

Sit Global Dividend  vs.  Sit Mid Cap

Sit Global Dividend

Risk-Adjusted Performance

Very Weak

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

Sit Mid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sit Mid Cap 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.

Pair Trading with Sit Global and Sit Mid

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

The idea behind Sit Global Dividend and Sit Mid 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.