Correlation Between Siit Large and American Funds

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

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

Diversification Opportunities for Siit Large and American Funds

0.55

Correlation Coefficient

Siit Large  American Funds

Very weak diversification

The 3 months correlation between Siit and American is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Siit Large Cap and American Funds New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds New and Siit Large 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 Siit Large Cap are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds New has no effect on the direction of Siit Large i.e., Siit Large and American Funds go up and down completely randomly.

Pair Corralation between Siit Large and American Funds

Assuming the 90 days horizon Siit Large Cap is expected to under-perform the American Funds. In addition to that, Siit Large is 3.12 times more volatile than American Funds New. It trades about -0.2 of its total potential returns per unit of risk. American Funds New is currently generating about -0.34 per unit of volatility. If you would invest  8,344  in American Funds New on October 8, 2024 and sell it today you would lose (583.00) from holding American Funds New or give up 6.99% of portfolio value over 90 days.

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

Siit Large Cap  vs.  American Funds New

Siit Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Siit Large Cap 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.

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.

Pair Trading with Siit Large and American Funds

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

The idea behind Siit Large Cap and American Funds New 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.