Correlation Between Ab Small and Siit Extended

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

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

Diversification Opportunities for Ab Small and Siit Extended

0.88

Correlation Coefficient

Ab Small  Siit Extended

Very poor diversification

The 3 months correlation between SCYVX and Siit is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Ab Small Cap and Siit Extended Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siit Extended Market and Ab Small 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 Ab Small Cap are associated (or correlated) with Siit Extended. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siit Extended Market has no effect on the direction of Ab Small i.e., Ab Small and Siit Extended go up and down completely randomly.

Pair Corralation between Ab Small and Siit Extended

Assuming the 90 days horizon Ab Small is expected to generate 4.6 times less return on investment than Siit Extended. But when comparing it to its historical volatility, Ab Small Cap is 1.02 times less risky than Siit Extended. It trades about 0.04 of its potential returns per unit of risk. Siit Extended Market is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,806  in Siit Extended Market on October 27, 2024 and sell it today you would earn a total of  56.00  from holding Siit Extended Market or generate 3.1% return on investment over 90 days.

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

Ab Small Cap  vs.  Siit Extended Market

Ab Small Cap

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Small Cap are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ab Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Siit Extended Market

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Siit Extended Market has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Siit Extended is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ab Small and Siit Extended

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

The idea behind Ab Small Cap and Siit Extended Market 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.