Correlation Between Siit Large and Small Cap

Can any of the company-specific risk be diversified away by investing in both Siit Large and Small Cap 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 Siit Large and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Siit Large Cap and Small Cap Core, you can compare the effects of market volatilities on Siit Large and Small Cap 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 Siit Large with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Siit Large and Small Cap.

Diversification Opportunities for Siit Large and Small Cap

0.99

Correlation Coefficient

Siit Large  Small Cap

No risk reduction

The 3 months correlation between Siit and Small is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Siit Large Cap and Small Cap Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Core and Siit Large 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 Siit Large Cap are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Core has no effect on the direction of Siit Large i.e., Siit Large and Small Cap go up and down completely randomly.

Pair Corralation between Siit Large and Small Cap

Assuming the 90 days horizon Siit Large Cap is expected to generate 0.67 times more return on investment than Small Cap. However, Siit Large Cap is 1.5 times less risky than Small Cap. It trades about 0.3 of its potential returns per unit of risk. Small Cap Core is currently generating about 0.19 per unit of risk. If you would invest  18,590  in Siit Large Cap on May 1, 2025 and sell it today you would earn a total of  2,686  from holding Siit Large Cap or generate 14.45% return on investment over 90 days.

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

Siit Large Cap  vs.  Small Cap Core

Siit Large Cap

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Siit Large Cap are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Siit Large showed solid returns over the last few months and may actually be approaching a breakup point.

Small Cap Core

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Core are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Small Cap showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Siit Large and Small Cap

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

The idea behind Siit Large Cap and Small Cap Core 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.