Correlation Between Sdit Short and Siit Long

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

By analyzing existing cross correlation between Sdit Short Duration and Siit Long Duration, you can compare the effects of market volatilities on Sdit Short and Siit Long 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 Sdit Short with a short position of Siit Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sdit Short and Siit Long.

Diversification Opportunities for Sdit Short and Siit Long

0.82

Correlation Coefficient

Sdit Short  Siit Long

Very poor diversification

The 3 months correlation between Sdit and Siit is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Sdit Short Duration and Siit Long Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siit Long Duration and Sdit Short 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 Sdit Short Duration are associated (or correlated) with Siit Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siit Long Duration has no effect on the direction of Sdit Short i.e., Sdit Short and Siit Long go up and down completely randomly.

Pair Corralation between Sdit Short and Siit Long

Assuming the 90 days horizon Sdit Short is expected to generate 1.13 times less return on investment than Siit Long. But when comparing it to its historical volatility, Sdit Short Duration is 4.93 times less risky than Siit Long. It trades about 0.22 of its potential returns per unit of risk. Siit Long Duration is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  756.00  in Siit Long Duration on December 27, 2024 and sell it today you would earn a total of  13.00  from holding Siit Long Duration or generate 1.72% return on investment over 90 days.

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

Sdit Short Duration  vs.  Siit Long Duration

Sdit Short Duration

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sdit Short Duration are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Sdit Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Siit Long Duration

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Sdit Short and Siit Long

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

The idea behind Sdit Short Duration and Siit Long Duration 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..