Correlation Between Sa Mkt and Sa Value

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

By analyzing existing cross correlation between Sa Mkt Fd and Sa Value, you can compare the effects of market volatilities on Sa Mkt and Sa Value 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 Sa Mkt with a short position of Sa Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sa Mkt and Sa Value.

Diversification Opportunities for Sa Mkt and Sa Value

0.96

Correlation Coefficient

Sa Mkt  Sa Value

Almost no diversification

The 3 months correlation between SAMKX and SABTX is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Sa Mkt Fd and Sa Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sa Value and Sa Mkt 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 Sa Mkt Fd are associated (or correlated) with Sa Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sa Value has no effect on the direction of Sa Mkt i.e., Sa Mkt and Sa Value go up and down completely randomly.

Pair Corralation between Sa Mkt and Sa Value

Assuming the 90 days horizon Sa Mkt Fd is expected to generate 0.86 times more return on investment than Sa Value. However, Sa Mkt Fd is 1.16 times less risky than Sa Value. It trades about 0.21 of its potential returns per unit of risk. Sa Value is currently generating about 0.14 per unit of risk. If you would invest  3,426  in Sa Mkt Fd on September 4, 2024 and sell it today you would earn a total of  332.00  from holding Sa Mkt Fd or generate 9.69% return on investment over 90 days.

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

Sa Mkt Fd  vs.  Sa Value

Sa Mkt Fd

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sa Mkt Fd are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, Sa Mkt may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sa Value

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sa Value are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Sa Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sa Mkt and Sa Value

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

The idea behind Sa Mkt Fd and Sa Value 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.