Correlation Between Sit Small and Sit Balanced

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

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

Diversification Opportunities for Sit Small and Sit Balanced

0.67

Correlation Coefficient

Sit Small  Sit Balanced

Poor diversification

The 3 months correlation between Sit and Sit is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Sit Small Cap and Sit Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit Balanced and Sit 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 Sit Small Cap are associated (or correlated) with Sit Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit Balanced has no effect on the direction of Sit Small i.e., Sit Small and Sit Balanced go up and down completely randomly.

Pair Corralation between Sit Small and Sit Balanced

Assuming the 90 days horizon Sit Small Cap is expected to under-perform the Sit Balanced. In addition to that, Sit Small is 1.42 times more volatile than Sit Balanced Fund. It trades about -0.1 of its total potential returns per unit of risk. Sit Balanced Fund is currently generating about -0.1 per unit of volatility. If you would invest  3,610  in Sit Balanced Fund on December 24, 2024 and sell it today you would lose (173.00) from holding Sit Balanced Fund or give up 4.79% of portfolio value over 90 days.

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

Sit Small Cap  vs.  Sit Balanced Fund

Sit Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sit Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Sit Balanced

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Sit Small and Sit Balanced

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

The idea behind Sit Small Cap and Sit Balanced Fund 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.