Correlation Between Siit High and Small Capitalization

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

By analyzing existing cross correlation between Siit High Yield and Small Capitalization Portfolio, you can compare the effects of market volatilities on Siit High and Small Capitalization 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 Siit High with a short position of Small Capitalization. Check out your portfolio center. Please also check ongoing floating volatility patterns of Siit High and Small Capitalization.

Diversification Opportunities for Siit High and Small Capitalization

-0.35

Correlation Coefficient

Siit High  Small Capitalization

Very good diversification

The 3 months correlation between Siit and Small is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Siit High Yield and Small Capitalization Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Capitalization and Siit High 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 Siit High Yield are associated (or correlated) with Small Capitalization. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Capitalization has no effect on the direction of Siit High i.e., Siit High and Small Capitalization go up and down completely randomly.

Pair Corralation between Siit High and Small Capitalization

Assuming the 90 days horizon Siit High Yield is expected to generate 0.23 times more return on investment than Small Capitalization. However, Siit High Yield is 4.42 times less risky than Small Capitalization. It trades about 0.32 of its potential returns per unit of risk. Small Capitalization Portfolio is currently generating about 0.06 per unit of risk. If you would invest  705.00  in Siit High Yield on October 25, 2024 and sell it today you would earn a total of  12.00  from holding Siit High Yield or generate 1.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Siit High Yield  vs.  Small Capitalization Portfolio

Siit High Yield

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Siit High Yield are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Siit High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Small Capitalization

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Capitalization Portfolio 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.

Pair Trading with Siit High and Small Capitalization

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

The idea behind Siit High Yield and Small Capitalization Portfolio 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.