Correlation Between Sit Dividend and Sit Mid

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

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

Diversification Opportunities for Sit Dividend and Sit Mid

0.61

Correlation Coefficient

Sit Dividend  Sit Mid

Poor diversification

The 3 months correlation between Sit and Sit is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Sit Dividend Growth and Sit Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit Mid Cap and Sit Dividend 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 Dividend Growth are associated (or correlated) with Sit Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit Mid Cap has no effect on the direction of Sit Dividend i.e., Sit Dividend and Sit Mid go up and down completely randomly.

Pair Corralation between Sit Dividend and Sit Mid

Assuming the 90 days horizon Sit Dividend Growth is expected to generate 0.61 times more return on investment than Sit Mid. However, Sit Dividend Growth is 1.64 times less risky than Sit Mid. It trades about -0.06 of its potential returns per unit of risk. Sit Mid Cap is currently generating about -0.11 per unit of risk. If you would invest  1,602  in Sit Dividend Growth on December 26, 2024 and sell it today you would lose (51.00) from holding Sit Dividend Growth or give up 3.18% of portfolio value over 90 days.

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

Sit Dividend Growth  vs.  Sit Mid Cap

Sit Dividend Growth

Risk-Adjusted Performance

Very Weak

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

Sit Mid Cap

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Sit Dividend and Sit Mid

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

The idea behind Sit Dividend Growth and Sit Mid 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.