Correlation Between Simt Small and Siit Large

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Can any of the company-specific risk be diversified away by investing in both Simt Small and Siit Large 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 Simt Small and Siit Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Simt Small Cap and Siit Large Cap, you can compare the effects of market volatilities on Simt Small and Siit Large 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 Simt Small with a short position of Siit Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simt Small and Siit Large.

Diversification Opportunities for Simt Small and Siit Large

0.97
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Simt and Siit is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Simt Small Cap and Siit Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siit Large Cap and Simt 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 Simt Small Cap are associated (or correlated) with Siit Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siit Large Cap has no effect on the direction of Simt Small i.e., Simt Small and Siit Large go up and down completely randomly.

Pair Corralation between Simt Small and Siit Large

Assuming the 90 days horizon Simt Small is expected to generate 1.04 times less return on investment than Siit Large. In addition to that, Simt Small is 1.27 times more volatile than Siit Large Cap. It trades about 0.06 of its total potential returns per unit of risk. Siit Large Cap is currently generating about 0.08 per unit of volatility. If you would invest  15,986  in Siit Large Cap on September 11, 2024 and sell it today you would earn a total of  7,044  from holding Siit Large Cap or generate 44.06% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy99.8%
ValuesDaily Returns

Simt Small Cap  vs.  Siit Large Cap

 Performance 
       Timeline  
Simt Small Cap 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Simt Small Cap are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Simt Small showed solid returns over the last few months and may actually be approaching a breakup point.
Siit Large Cap 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Siit Large Cap are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Siit Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Simt Small and Siit Large Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Simt Small and Siit Large

The main advantage of trading using opposite Simt Small and Siit Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simt Small position performs unexpectedly, Siit Large 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 Siit Large will offset losses from the drop in Siit Large's long position.
The idea behind Simt Small Cap and Siit Large 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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