Correlation Between Stet Tax-advantaged and Sit International
Can any of the company-specific risk be diversified away by investing in both Stet Tax-advantaged and Sit International 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 Stet Tax-advantaged and Sit International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stet Tax Advantaged Income and Sit International Equity, you can compare the effects of market volatilities on Stet Tax-advantaged and Sit International 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 Stet Tax-advantaged with a short position of Sit International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stet Tax-advantaged and Sit International.
Diversification Opportunities for Stet Tax-advantaged and Sit International
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Stet and Sit is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Stet Tax Advantaged Income and Sit International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit International Equity and Stet Tax-advantaged 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 Stet Tax Advantaged Income are associated (or correlated) with Sit International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit International Equity has no effect on the direction of Stet Tax-advantaged i.e., Stet Tax-advantaged and Sit International go up and down completely randomly.
Pair Corralation between Stet Tax-advantaged and Sit International
Assuming the 90 days horizon Stet Tax-advantaged is expected to generate 8.54 times less return on investment than Sit International. But when comparing it to its historical volatility, Stet Tax Advantaged Income is 3.32 times less risky than Sit International. It trades about 0.13 of its potential returns per unit of risk. Sit International Equity is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 1,115 in Sit International Equity on November 8, 2024 and sell it today you would earn a total of 63.00 from holding Sit International Equity or generate 5.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stet Tax Advantaged Income vs. Sit International Equity
Performance |
| Timeline |
| Stet Tax Advantaged |
| Sit International Equity |
Stet Tax-advantaged and Sit International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stet Tax-advantaged and Sit International
The main advantage of trading using opposite Stet Tax-advantaged and Sit International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stet Tax-advantaged position performs unexpectedly, Sit International 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 International will offset losses from the drop in Sit International's long position.The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Stet Tax-advantaged as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Stet Tax-advantaged's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Stet Tax-advantaged's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Stet Tax Advantaged Income.
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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