Correlation Between Long Term and Sit Government

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

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

Diversification Opportunities for Long Term and Sit Government

0.98

Correlation Coefficient

Long Term  Sit Government

Almost no diversification

The 3 months correlation between Long and Sit is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Long Term Government Fund 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 Long Term 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 Long Term Government Fund 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 Long Term i.e., Long Term and Sit Government go up and down completely randomly.

Pair Corralation between Long Term and Sit Government

Assuming the 90 days horizon Long Term Government Fund is expected to under-perform the Sit Government. In addition to that, Long Term is 3.76 times more volatile than Sit Government Securities. It trades about -0.13 of its total potential returns per unit of risk. Sit Government Securities is currently generating about -0.12 per unit of volatility. If you would invest  1,044  in Sit Government Securities on September 13, 2024 and sell it today you would lose (17.00) from holding Sit Government Securities or give up 1.63% of portfolio value over 90 days.

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

Long Term Government Fund  vs.  Sit Government Securities

Long Term Government

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Long Term Government Fund 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.

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 Long Term and Sit Government

The main advantage of trading using opposite Long Term and Sit Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Long Term 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 Long Term Government Fund 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 CEOs Directory module to screen CEOs from public companies around the world.