Correlation Between Siit Small and Simt Tax-managed

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

By analyzing existing cross correlation between Siit Small Mid and Simt Tax Managed Large, you can compare the effects of market volatilities on Siit Small and Simt Tax-managed 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 Siit Small with a short position of Simt Tax-managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Siit Small and Simt Tax-managed.

Diversification Opportunities for Siit Small and Simt Tax-managed

0.85

Correlation Coefficient

Siit Small  Simt Tax-managed

Very poor diversification

The 3 months correlation between Siit and Simt is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Siit Small Mid and Simt Tax Managed Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simt Tax Managed and Siit 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 Siit Small Mid are associated (or correlated) with Simt Tax-managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simt Tax Managed has no effect on the direction of Siit Small i.e., Siit Small and Simt Tax-managed go up and down completely randomly.

Pair Corralation between Siit Small and Simt Tax-managed

Assuming the 90 days horizon Siit Small Mid is expected to under-perform the Simt Tax-managed. In addition to that, Siit Small is 1.27 times more volatile than Simt Tax Managed Large. It trades about -0.08 of its total potential returns per unit of risk. Simt Tax Managed Large is currently generating about -0.03 per unit of volatility. If you would invest  3,577  in Simt Tax Managed Large on December 27, 2024 and sell it today you would lose (52.00) from holding Simt Tax Managed Large or give up 1.45% of portfolio value over 90 days.

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

Siit Small Mid  vs.  Simt Tax Managed Large

Siit Small Mid

Risk-Adjusted Performance

Very Weak

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

Simt Tax Managed

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Siit Small and Simt Tax-managed

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

The idea behind Siit Small Mid and Simt Tax Managed Large 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.