Correlation Between Cref Inflation-linked and Sit Small

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

By analyzing existing cross correlation between Cref Inflation Linked Bond and Sit Small Cap, you can compare the effects of market volatilities on Cref Inflation-linked and Sit Small 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 Cref Inflation-linked with a short position of Sit Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cref Inflation-linked and Sit Small.

Diversification Opportunities for Cref Inflation-linked and Sit Small

-0.24

Correlation Coefficient

Cref Inflation-linked  Sit Small

Very good diversification

The 3 months correlation between Cref and Sit is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Cref Inflation Linked Bond and Sit Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit Small Cap and Cref Inflation-linked 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 Cref Inflation Linked Bond are associated (or correlated) with Sit Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit Small Cap has no effect on the direction of Cref Inflation-linked i.e., Cref Inflation-linked and Sit Small go up and down completely randomly.

Pair Corralation between Cref Inflation-linked and Sit Small

Assuming the 90 days trading horizon Cref Inflation Linked Bond is expected to generate 0.16 times more return on investment than Sit Small. However, Cref Inflation Linked Bond is 6.13 times less risky than Sit Small. It trades about 0.44 of its potential returns per unit of risk. Sit Small Cap is currently generating about -0.34 per unit of risk. If you would invest  8,579  in Cref Inflation Linked Bond on December 2, 2024 and sell it today you would earn a total of  144.00  from holding Cref Inflation Linked Bond or generate 1.68% return on investment over 90 days.

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

Cref Inflation Linked Bond  vs.  Sit Small Cap

Cref Inflation Linked

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cref Inflation Linked Bond are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Cref Inflation-linked is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sit Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sit Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Cref Inflation-linked and Sit Small

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

The idea behind Cref Inflation Linked Bond and Sit Small 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.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.