Correlation Between Sit Small and Sit Government

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

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

Diversification Opportunities for Sit Small and Sit Government

-0.76

Correlation Coefficient

Sit Small  Sit Government

Pay attention - limited upside

The 3 months correlation between Sit and Sit is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sit Small Cap and Sit Government Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit Government Securities and Sit Small 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 Small Cap are associated (or correlated) with Sit Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit Government Securities has no effect on the direction of Sit Small i.e., Sit Small and Sit Government go up and down completely randomly.

Pair Corralation between Sit Small and Sit Government

Assuming the 90 days horizon Sit Small Cap is expected to under-perform the Sit Government. In addition to that, Sit Small is 4.97 times more volatile than Sit Government Securities. It trades about -0.06 of its total potential returns per unit of risk. Sit Government Securities is currently generating about 0.17 per unit of volatility. If you would invest  1,006  in Sit Government Securities on December 26, 2024 and sell it today you would earn a total of  24.00  from holding Sit Government Securities or generate 2.39% return on investment over 90 days.

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

Sit Small Cap  vs.  Sit Government Securities

Sit Small Cap

Risk-Adjusted Performance

Very Weak

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

Sit Government Securities

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sit Government Securities are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Sit Government 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 Small and Sit Government

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

The idea behind Sit Small Cap and Sit Government Securities 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.