Correlation Between Sit International and Sit Emerging

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

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

Diversification Opportunities for Sit International and Sit Emerging

0.84

Correlation Coefficient

Sit International  Sit Emerging

Very poor diversification

The 3 months correlation between Sit and Sit is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Sit International Equity and Sit Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit Emerging Markets and Sit International 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 International Equity are associated (or correlated) with Sit Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit Emerging Markets has no effect on the direction of Sit International i.e., Sit International and Sit Emerging go up and down completely randomly.

Pair Corralation between Sit International and Sit Emerging

Assuming the 90 days horizon Sit International Equity is expected to generate 1.06 times more return on investment than Sit Emerging. However, Sit International is 1.06 times more volatile than Sit Emerging Markets. It trades about 0.17 of its potential returns per unit of risk. Sit Emerging Markets is currently generating about -0.05 per unit of risk. If you would invest  1,099  in Sit International Equity on October 20, 2024 and sell it today you would earn a total of  25.00  from holding Sit International Equity or generate 2.27% return on investment over 90 days.

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

Sit International Equity  vs.  Sit Emerging Markets

Sit International Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sit Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sit Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Sit Emerging 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 International and Sit Emerging

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

The idea behind Sit International Equity and Sit Emerging Markets 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.