Correlation Between Small Cap and Sit Small
Can any of the company-specific risk be diversified away by investing in both Small Cap and Sit 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 Small Cap and Sit Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Stock and Sit Small Cap, you can compare the effects of market volatilities on Small Cap and Sit 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 Small Cap with a short position of Sit Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Sit Small.
Diversification Opportunities for Small Cap and Sit Small
Very poor diversification
The 3 months correlation between Small and Sit is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Sit Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit Small Cap and Small Cap 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 Small Cap Stock are associated (or correlated) with Sit Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit Small Cap has no effect on the direction of Small Cap i.e., Small Cap and Sit Small go up and down completely randomly.
Pair Corralation between Small Cap and Sit Small
Assuming the 90 days horizon Small Cap is expected to generate 1.07 times less return on investment than Sit Small. In addition to that, Small Cap is 1.17 times more volatile than Sit Small Cap. It trades about 0.08 of its total potential returns per unit of risk. Sit Small Cap is currently generating about 0.1 per unit of volatility. If you would invest 1,616 in Sit Small Cap on September 1, 2024 and sell it today you would earn a total of 253.00 from holding Sit Small Cap or generate 15.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Small Cap Stock vs. Sit Small Cap
Performance |
| Timeline |
| Small Cap Stock |
| Sit Small Cap |
Small Cap and Sit Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Sit Small
The main advantage of trading using opposite Small Cap and Sit Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Sit 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 Sit Small will offset losses from the drop in Sit Small's long position.| Small Cap vs. Western Asset High | Small Cap vs. Needham Aggressive Growth | Small Cap vs. T Rowe Price | Small Cap vs. California High Yield Municipal |
| Sit Small vs. Sit Small Cap | Sit Small vs. Sit Global Dividend | Sit Small vs. Sit Global Dividend | Sit Small 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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