Correlation Between Sit Small and Sit Developing

Can any of the company-specific risk be diversified away by investing in both Sit Small and Sit Developing 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 Developing 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 Developing Markets, you can compare the effects of market volatilities on Sit Small and Sit Developing 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 Developing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sit Small and Sit Developing.

Diversification Opportunities for Sit Small and Sit Developing

0.46

Correlation Coefficient

Sit Small  Sit Developing

Very weak diversification

The 3 months correlation between Sit and Sit is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Sit Small Cap and Sit Developing Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit Developing Markets 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 Developing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit Developing Markets has no effect on the direction of Sit Small i.e., Sit Small and Sit Developing go up and down completely randomly.

Pair Corralation between Sit Small and Sit Developing

Assuming the 90 days horizon Sit Small Cap is expected to under-perform the Sit Developing. In addition to that, Sit Small is 1.22 times more volatile than Sit Developing Markets. It trades about -0.2 of its total potential returns per unit of risk. Sit Developing Markets is currently generating about -0.05 per unit of volatility. If you would invest  1,766  in Sit Developing Markets on December 2, 2024 and sell it today you would lose (65.00) from holding Sit Developing Markets or give up 3.68% of portfolio value over 90 days.

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

Sit Small Cap  vs.  Sit Developing Markets

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 weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly 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 fund investors.

Sit Developing Markets

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sit Developing Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Sit Developing 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 Developing

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

The idea behind Sit Small Cap and Sit Developing Markets 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.

Check out your portfolio center.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.