Correlation Between Sit Mid and Quantitative Longshort

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

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

Diversification Opportunities for Sit Mid and Quantitative Longshort

0.59

Correlation Coefficient

Sit Mid  Quantitative Longshort

Very weak diversification

The 3 months correlation between Sit and Quantitative is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Sit Mid Cap and Quantitative Longshort Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quantitative Longshort and Sit 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 Sit Mid Cap are associated (or correlated) with Quantitative Longshort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quantitative Longshort has no effect on the direction of Sit Mid i.e., Sit Mid and Quantitative Longshort go up and down completely randomly.

Pair Corralation between Sit Mid and Quantitative Longshort

Assuming the 90 days horizon Sit Mid Cap is expected to generate 0.85 times more return on investment than Quantitative Longshort. However, Sit Mid Cap is 1.17 times less risky than Quantitative Longshort. It trades about -0.1 of its potential returns per unit of risk. Quantitative Longshort Equity is currently generating about -0.22 per unit of risk. If you would invest  2,570  in Sit Mid Cap on October 9, 2024 and sell it today you would lose (90.00) from holding Sit Mid Cap or give up 3.5% of portfolio value over 90 days.

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

Sit Mid Cap  vs.  Quantitative Longshort Equity

Sit Mid Cap

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sit Mid Cap are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Sit Mid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Quantitative Longshort

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sit Mid and Quantitative Longshort

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

The idea behind Sit Mid Cap and Quantitative Longshort Equity 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.