Correlation Between Midcap Fund and Sit Mid

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

Diversification Opportunities for Midcap Fund and Sit Mid

0.92
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Midcap and Sit is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Midcap Fund Class and Sit Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit Mid Cap and Midcap Fund 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 Midcap Fund Class are associated (or correlated) with Sit Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit Mid Cap has no effect on the direction of Midcap Fund i.e., Midcap Fund and Sit Mid go up and down completely randomly.

Pair Corralation between Midcap Fund and Sit Mid

Assuming the 90 days horizon Midcap Fund is expected to generate 1.06 times less return on investment than Sit Mid. But when comparing it to its historical volatility, Midcap Fund Class is 1.04 times less risky than Sit Mid. It trades about 0.2 of its potential returns per unit of risk. Sit Mid Cap is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,422  in Sit Mid Cap on August 26, 2024 and sell it today you would earn a total of  120.00  from holding Sit Mid Cap or generate 4.95% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Midcap Fund Class  vs.  Sit Mid Cap

 Performance 
       Timeline  
Midcap Fund Class 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Midcap Fund Class are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Midcap Fund may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Sit Mid Cap 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Sit Mid Cap are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Sit Mid may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Midcap Fund and Sit Mid Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Midcap Fund and Sit Mid

The main advantage of trading using opposite Midcap Fund and Sit Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Midcap Fund position performs unexpectedly, Sit Mid 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 Mid will offset losses from the drop in Sit Mid's long position.
The idea behind Midcap Fund Class and Sit Mid 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.
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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