Correlation Between Balanced Fund and Sit Tax
Can any of the company-specific risk be diversified away by investing in both Balanced Fund and Sit Tax 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 Balanced Fund and Sit Tax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balanced Fund Investor and Sit Tax Free Income, you can compare the effects of market volatilities on Balanced Fund and Sit Tax 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 Balanced Fund with a short position of Sit Tax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Fund and Sit Tax.
Diversification Opportunities for Balanced Fund and Sit Tax
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Balanced and Sit is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Investor and Sit Tax Free Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit Tax Free and Balanced 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 Balanced Fund Investor are associated (or correlated) with Sit Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit Tax Free has no effect on the direction of Balanced Fund i.e., Balanced Fund and Sit Tax go up and down completely randomly.
Pair Corralation between Balanced Fund and Sit Tax
Assuming the 90 days horizon Balanced Fund is expected to generate 1.17 times less return on investment than Sit Tax. In addition to that, Balanced Fund is 2.59 times more volatile than Sit Tax Free Income. It trades about 0.16 of its total potential returns per unit of risk. Sit Tax Free Income is currently generating about 0.49 per unit of volatility. If you would invest 876.00 in Sit Tax Free Income on September 13, 2024 and sell it today you would earn a total of 13.00 from holding Sit Tax Free Income or generate 1.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Balanced Fund Investor vs. Sit Tax Free Income
Performance |
| Timeline |
| Balanced Fund Investor |
| Sit Tax Free |
Balanced Fund and Sit Tax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balanced Fund and Sit Tax
The main advantage of trading using opposite Balanced Fund and Sit Tax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Fund position performs unexpectedly, Sit Tax 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 Tax will offset losses from the drop in Sit Tax's long position.| Balanced Fund vs. Select Fund Investor | Balanced Fund vs. Heritage Fund Investor | Balanced Fund vs. Value Fund Investor | Balanced Fund vs. Growth Fund Investor |
| Sit Tax vs. Sit Small Cap | Sit Tax vs. Sit Global Dividend | Sit Tax vs. Sit Global Dividend | Sit Tax vs. Sit Small Cap |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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