Correlation Between Stet California and Siit Large

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

By analyzing existing cross correlation between Stet California Municipal and Siit Large Cap, you can compare the effects of market volatilities on Stet California and Siit Large 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 Stet California with a short position of Siit Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stet California and Siit Large.

Diversification Opportunities for Stet California and Siit Large

-0.29

Correlation Coefficient

Stet California  Siit Large

Very good diversification

The 3 months correlation between Stet and Siit is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Stet California Municipal and Siit Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siit Large Cap and Stet California 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 Stet California Municipal are associated (or correlated) with Siit Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siit Large Cap has no effect on the direction of Stet California i.e., Stet California and Siit Large go up and down completely randomly.

Pair Corralation between Stet California and Siit Large

Assuming the 90 days horizon Stet California is expected to generate 26.28 times less return on investment than Siit Large. But when comparing it to its historical volatility, Stet California Municipal is 3.49 times less risky than Siit Large. It trades about 0.04 of its potential returns per unit of risk. Siit Large Cap is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  20,359  in Siit Large Cap on September 6, 2024 and sell it today you would earn a total of  2,818  from holding Siit Large Cap or generate 13.84% return on investment over 90 days.

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

Stet California Municipal  vs.  Siit Large Cap

Stet California Municipal

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Stet California Municipal are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Stet California is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Siit Large Cap

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Siit Large Cap are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Siit Large showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stet California and Siit Large

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

The idea behind Stet California Municipal and Siit Large 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.