Correlation Between Simt Tax-managed and Siit Small

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

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

Diversification Opportunities for Simt Tax-managed and Siit Small

0.86

Correlation Coefficient

Simt Tax-managed  Siit Small

Very poor diversification

The 3 months correlation between Simt and Siit is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Simt Tax Managed Managed and Siit Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siit Small Cap and Simt Tax-managed 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 Tax Managed Managed are associated (or correlated) with Siit Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siit Small Cap has no effect on the direction of Simt Tax-managed i.e., Simt Tax-managed and Siit Small go up and down completely randomly.

Pair Corralation between Simt Tax-managed and Siit Small

Assuming the 90 days horizon Simt Tax-managed is expected to generate 2.93 times less return on investment than Siit Small. But when comparing it to its historical volatility, Simt Tax Managed Managed is 2.11 times less risky than Siit Small. It trades about 0.12 of its potential returns per unit of risk. Siit Small Cap is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,165  in Siit Small Cap on September 3, 2024 and sell it today you would earn a total of  144.00  from holding Siit Small Cap or generate 12.36% return on investment over 90 days.

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

Simt Tax Managed Managed  vs.  Siit Small Cap

Simt Tax Managed

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Simt Tax Managed Managed are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. 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.

Siit Small Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Siit Small Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Siit Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Simt Tax-managed and Siit Small

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

The idea behind Simt Tax Managed Managed and Siit Small 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.