Correlation Between Target Retirement and Simt Small
Can any of the company-specific risk be diversified away by investing in both Target Retirement and Simt 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 Target Retirement and Simt Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Target Retirement 2040 and Simt Small Cap, you can compare the effects of market volatilities on Target Retirement and Simt 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 Target Retirement with a short position of Simt Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target Retirement and Simt Small.
Diversification Opportunities for Target Retirement and Simt Small
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Target and Simt is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Target Retirement 2040 and Simt Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simt Small Cap and Target Retirement 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 Target Retirement 2040 are associated (or correlated) with Simt Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simt Small Cap has no effect on the direction of Target Retirement i.e., Target Retirement and Simt Small go up and down completely randomly.
Pair Corralation between Target Retirement and Simt Small
Assuming the 90 days horizon Target Retirement is expected to generate 1.16 times less return on investment than Simt Small. But when comparing it to its historical volatility, Target Retirement 2040 is 2.15 times less risky than Simt Small. It trades about 0.24 of its potential returns per unit of risk. Simt Small Cap is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 3,568 in Simt Small Cap on November 3, 2024 and sell it today you would earn a total of 111.00 from holding Simt Small Cap or generate 3.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Target Retirement 2040 vs. Simt Small Cap
Performance |
| Timeline |
| Target Retirement 2040 |
| Simt Small Cap |
Target Retirement and Simt Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Target Retirement and Simt Small
The main advantage of trading using opposite Target Retirement and Simt Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target Retirement position performs unexpectedly, Simt 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 Simt Small will offset losses from the drop in Simt Small's long position.| Target Retirement vs. Ashmore Emerging Markets | Target Retirement vs. Mid Cap 15x Strategy | Target Retirement vs. Investec Emerging Markets | Target Retirement vs. Aqr Tm Emerging |
| Simt Small vs. Simt Mid Cap | Simt Small vs. Simt High Yield | Simt Small vs. Simt Multi Asset Accumulation | Simt Small vs. Simt Real Return |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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