Correlation Between Sit Balanced and Sit Small

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

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

Diversification Opportunities for Sit Balanced and Sit Small

0.89

Correlation Coefficient

Sit Balanced  Sit Small

Very poor diversification

The 3 months correlation between Sit and Sit is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Sit Balanced Fund and Sit Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit Small Cap and Sit Balanced 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 Balanced Fund are associated (or correlated) with Sit Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit Small Cap has no effect on the direction of Sit Balanced i.e., Sit Balanced and Sit Small go up and down completely randomly.

Pair Corralation between Sit Balanced and Sit Small

Assuming the 90 days horizon Sit Balanced is expected to generate 1.58 times less return on investment than Sit Small. But when comparing it to its historical volatility, Sit Balanced Fund is 1.94 times less risky than Sit Small. It trades about 0.15 of its potential returns per unit of risk. Sit Small Cap is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  6,678  in Sit Small Cap on September 12, 2024 and sell it today you would earn a total of  531.00  from holding Sit Small Cap or generate 7.95% return on investment over 90 days.

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

Sit Balanced Fund  vs.  Sit Small Cap

Sit Balanced

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sit Balanced Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. 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.

Sit Small Cap

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sit Small Cap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Sit Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sit Balanced and Sit Small

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

The idea behind Sit Balanced Fund and Sit Small 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 Stocks Directory module to find actively traded stocks across global markets.