Correlation Between Simt Small and Siit Large
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
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Simt and Siit is 0.95. 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 Cap is expected to generate 1.95 times more return on investment than Siit Large. However, Simt Small is 1.95 times more volatile than Siit Large Cap. It trades about 0.31 of its potential returns per unit of risk. Siit Large Cap is currently generating about 0.22 per unit of risk. If you would invest 3,762 in Simt Small Cap on August 28, 2024 and sell it today you would earn a total of 394.00 from holding Simt Small Cap or generate 10.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Simt Small Cap vs. Siit Large Cap
Performance |
| Timeline |
| Simt Small Cap |
| Siit Large Cap |
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.| Simt Small vs. T Rowe Price | Simt Small vs. Franklin High Yield | Simt Small vs. Oklahoma Municipal Fund | Simt Small vs. Ishares Municipal Bond |
| Siit Large vs. Metropolitan West Porate | Siit Large vs. Multisector Bond Sma | Siit Large vs. Versatile Bond Portfolio | Siit Large vs. Nuveen All American Municipal |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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