Correlation Between Guidemark Smallmid and Sit Government

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

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

Diversification Opportunities for Guidemark Smallmid and Sit Government

-0.39

Correlation Coefficient

Guidemark Smallmid  Sit Government

Very good diversification

The 3 months correlation between Guidemark and Sit is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Guidemark Smallmid Cap and Sit Government Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit Government Securities and Guidemark Smallmid 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 Guidemark Smallmid Cap are associated (or correlated) with Sit Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit Government Securities has no effect on the direction of Guidemark Smallmid i.e., Guidemark Smallmid and Sit Government go up and down completely randomly.

Pair Corralation between Guidemark Smallmid and Sit Government

Assuming the 90 days horizon Guidemark Smallmid Cap is expected to generate 5.38 times more return on investment than Sit Government. However, Guidemark Smallmid is 5.38 times more volatile than Sit Government Securities. It trades about 0.02 of its potential returns per unit of risk. Sit Government Securities is currently generating about 0.03 per unit of risk. If you would invest  2,079  in Guidemark Smallmid Cap on September 21, 2024 and sell it today you would earn a total of  48.00  from holding Guidemark Smallmid Cap or generate 2.31% return on investment over 90 days.

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

Guidemark Smallmid Cap  vs.  Sit Government Securities

Guidemark Smallmid Cap

Risk-Adjusted Performance

1 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guidemark Smallmid Cap are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Guidemark Smallmid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sit Government Securities

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Guidemark Smallmid and Sit Government

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

The idea behind Guidemark Smallmid Cap and Sit Government Securities 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.