Correlation Between Victory Global and Sit Small

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

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

Diversification Opportunities for Victory Global and Sit Small

0.89

Correlation Coefficient

Victory Global  Sit Small

Very poor diversification

The 3 months correlation between Victory and Sit is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Victory Global Natural 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 Victory Global 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 Victory Global Natural 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 Victory Global i.e., Victory Global and Sit Small go up and down completely randomly.

Pair Corralation between Victory Global and Sit Small

Assuming the 90 days horizon Victory Global is expected to generate 1.74 times less return on investment than Sit Small. In addition to that, Victory Global is 1.16 times more volatile than Sit Small Cap. It trades about 0.03 of its total potential returns per unit of risk. Sit Small Cap is currently generating about 0.06 per unit of volatility. If you would invest  5,368  in Sit Small Cap on September 5, 2024 and sell it today you would earn a total of  1,991  from holding Sit Small Cap or generate 37.09% return on investment over 90 days.

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

Victory Global Natural  vs.  Sit Small Cap

Victory Global Natural

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Victory Global Natural are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Victory Global showed solid returns over the last few months and may actually be approaching a breakup point.

Sit Small Cap

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sit Small Cap are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Sit Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Victory Global and Sit Small

The main advantage of trading using opposite Victory Global and Sit Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Victory Global 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 Victory Global Natural 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.