Correlation Between Sit Tax and Sit Developing

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

By analyzing existing cross correlation between Sit Tax Free Income and Sit Developing Markets, you can compare the effects of market volatilities on Sit Tax and Sit Developing 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 Sit Tax with a short position of Sit Developing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sit Tax and Sit Developing.

Diversification Opportunities for Sit Tax and Sit Developing

-0.25

Correlation Coefficient

Sit Tax  Sit Developing

Very good diversification

The 3 months correlation between Sit and Sit is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sit Tax Free Income and Sit Developing Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit Developing Markets and Sit Tax 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 Sit Tax Free Income are associated (or correlated) with Sit Developing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit Developing Markets has no effect on the direction of Sit Tax i.e., Sit Tax and Sit Developing go up and down completely randomly.

Pair Corralation between Sit Tax and Sit Developing

Assuming the 90 days horizon Sit Tax Free Income is expected to under-perform the Sit Developing. But the mutual fund apears to be less risky and, when comparing its historical volatility, Sit Tax Free Income is 3.36 times less risky than Sit Developing. The mutual fund trades about -0.11 of its potential returns per unit of risk. The Sit Developing Markets is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  1,720  in Sit Developing Markets on May 1, 2025 and sell it today you would earn a total of  323.00  from holding Sit Developing Markets or generate 18.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Sit Tax Free Income  vs.  Sit Developing Markets

Sit Tax Free

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sit Tax Free Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Sit Tax is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sit Developing Markets

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Sit Developing Markets are ranked lower than 28 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Sit Developing showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sit Tax and Sit Developing

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

The idea behind Sit Tax Free Income and Sit Developing Markets 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.