Correlation Between Sierra E and Saat Moderate

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

By analyzing existing cross correlation between Sierra E Retirement and Saat Moderate Strategy, you can compare the effects of market volatilities on Sierra E and Saat Moderate 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 Sierra E with a short position of Saat Moderate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sierra E and Saat Moderate.

Diversification Opportunities for Sierra E and Saat Moderate

0.8

Correlation Coefficient

Sierra E  Saat Moderate

Very poor diversification

The 3 months correlation between Sierra and Saat is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Sierra E Retirement and Saat Moderate Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saat Moderate Strategy and Sierra E 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 Sierra E Retirement are associated (or correlated) with Saat Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saat Moderate Strategy has no effect on the direction of Sierra E i.e., Sierra E and Saat Moderate go up and down completely randomly.

Pair Corralation between Sierra E and Saat Moderate

Assuming the 90 days horizon Sierra E Retirement is expected to generate 1.12 times more return on investment than Saat Moderate. However, Sierra E is 1.12 times more volatile than Saat Moderate Strategy. It trades about -0.01 of its potential returns per unit of risk. Saat Moderate Strategy is currently generating about -0.02 per unit of risk. If you would invest  2,323  in Sierra E Retirement on September 15, 2024 and sell it today you would lose (4.00) from holding Sierra E Retirement or give up 0.17% of portfolio value over 90 days.

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

Sierra E Retirement  vs.  Saat Moderate Strategy

Sierra E Retirement

Risk-Adjusted Performance

0 of 100

Very Weak

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

Saat Moderate Strategy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sierra E and Saat Moderate

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

The idea behind Sierra E Retirement and Saat Moderate Strategy 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.