Correlation Between SIL Investments and Investment Trust

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

By analyzing existing cross correlation between SIL Investments Limited and The Investment Trust, you can compare the effects of market volatilities on SIL Investments and Investment Trust 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 SIL Investments with a short position of Investment Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIL Investments and Investment Trust.

Diversification Opportunities for SIL Investments and Investment Trust

0.96

Correlation Coefficient

SIL Investments  Investment Trust

Almost no diversification

The 3 months correlation between SIL and Investment is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding SIL Investments Limited and The Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Trust and SIL Investments 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 SIL Investments Limited are associated (or correlated) with Investment Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Trust has no effect on the direction of SIL Investments i.e., SIL Investments and Investment Trust go up and down completely randomly.

Pair Corralation between SIL Investments and Investment Trust

Assuming the 90 days trading horizon SIL Investments Limited is expected to under-perform the Investment Trust. But the stock apears to be less risky and, when comparing its historical volatility, SIL Investments Limited is 1.1 times less risky than Investment Trust. The stock trades about -0.26 of its potential returns per unit of risk. The The Investment Trust is currently generating about -0.24 of returns per unit of risk over similar time horizon. If you would invest  20,619  in The Investment Trust on December 1, 2024 and sell it today you would lose (7,043) from holding The Investment Trust or give up 34.16% of portfolio value over 90 days.

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

SIL Investments Limited  vs.  The Investment Trust

SIL Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days SIL Investments Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Investment Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with SIL Investments and Investment Trust

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

The idea behind SIL Investments Limited and The Investment Trust 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.