Correlation Between Keeley Mid and Simt Mid

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

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

Diversification Opportunities for Keeley Mid and Simt Mid

0.85

Correlation Coefficient

Keeley Mid  Simt Mid

Very poor diversification

The 3 months correlation between Keeley and Simt is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Keeley Mid Cap and Simt Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simt Mid Cap and Keeley Mid 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 Keeley Mid Cap are associated (or correlated) with Simt Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simt Mid Cap has no effect on the direction of Keeley Mid i.e., Keeley Mid and Simt Mid go up and down completely randomly.

Pair Corralation between Keeley Mid and Simt Mid

Assuming the 90 days horizon Keeley Mid Cap is expected to generate 1.04 times more return on investment than Simt Mid. However, Keeley Mid is 1.04 times more volatile than Simt Mid Cap. It trades about -0.03 of its potential returns per unit of risk. Simt Mid Cap is currently generating about -0.04 per unit of risk. If you would invest  2,938  in Keeley Mid Cap on December 28, 2024 and sell it today you would lose (69.00) from holding Keeley Mid Cap or give up 2.35% of portfolio value over 90 days.

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

Keeley Mid Cap  vs.  Simt Mid Cap

Keeley Mid Cap

Risk-Adjusted Performance

Very Weak

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

Simt Mid Cap

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Keeley Mid and Simt Mid

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

The idea behind Keeley Mid Cap and Simt 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.