Correlation Between Simt Mid and Government Street

Can any of the company-specific risk be diversified away by investing in both Simt Mid and Government Street 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 Mid and Government Street into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Simt Mid Cap and Government Street Equity, you can compare the effects of market volatilities on Simt Mid and Government Street 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 Mid with a short position of Government Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simt Mid and Government Street.

Diversification Opportunities for Simt Mid and Government Street

0.96

Correlation Coefficient

Simt Mid  Government Street

Almost no diversification

The 3 months correlation between Simt and Government is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Simt Mid Cap and Government Street Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Government Street Equity and Simt Mid 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 Mid Cap are associated (or correlated) with Government Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government Street Equity has no effect on the direction of Simt Mid i.e., Simt Mid and Government Street go up and down completely randomly.

Pair Corralation between Simt Mid and Government Street

Assuming the 90 days horizon Simt Mid Cap is expected to under-perform the Government Street. But the mutual fund apears to be less risky and, when comparing its historical volatility, Simt Mid Cap is 1.15 times less risky than Government Street. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Government Street Equity is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  11,044  in Government Street Equity on February 4, 2024 and sell it today you would lose (1.00) from holding Government Street Equity or give up 0.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Simt Mid Cap  vs.  Government Street Equity

Simt Mid Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Simt Mid Cap are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Simt Mid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Government Street Equity

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Government Street Equity are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Government Street is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Simt Mid and Government Street

The main advantage of trading using opposite Simt Mid and Government Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simt Mid position performs unexpectedly, Government Street 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 Government Street will offset losses from the drop in Government Street's long position.

The idea behind Simt Mid Cap and Government Street Equity pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.