Correlation Between Stet California and Simt Tax-managed

Can any of the company-specific risk be diversified away by investing in both Stet California and Simt Tax-managed 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 Simt Tax-managed 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 Simt Tax Managed Smallmid, you can compare the effects of market volatilities on Stet California and Simt Tax-managed 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 Simt Tax-managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stet California and Simt Tax-managed.

Diversification Opportunities for Stet California and Simt Tax-managed

-0.34

Correlation Coefficient

Stet California  Simt Tax-managed

Very good diversification

The 3 months correlation between Stet and Simt is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Stet California Municipal and Simt Tax Managed Smallmid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simt Tax Managed 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 Simt Tax-managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simt Tax Managed has no effect on the direction of Stet California i.e., Stet California and Simt Tax-managed go up and down completely randomly.

Pair Corralation between Stet California and Simt Tax-managed

Assuming the 90 days horizon Stet California Municipal is expected to generate 0.18 times more return on investment than Simt Tax-managed. However, Stet California Municipal is 5.53 times less risky than Simt Tax-managed. It trades about -0.04 of its potential returns per unit of risk. Simt Tax Managed Smallmid is currently generating about -0.07 per unit of risk. If you would invest  1,007  in Stet California Municipal on December 28, 2024 and sell it today you would lose (5.00) from holding Stet California Municipal or give up 0.5% of portfolio value over 90 days.

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

Stet California Municipal  vs.  Simt Tax Managed Smallmid

Stet California Municipal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stet California Municipal has generated negative risk-adjusted returns adding no value to fund investors. 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.

Simt Tax Managed

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Stet California and Simt Tax-managed

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

The idea behind Stet California Municipal and Simt Tax Managed Smallmid 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.