Correlation Between Siit Ultra and California Municipal

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

By analyzing existing cross correlation between Siit Ultra Short and California Municipal Portfolio, you can compare the effects of market volatilities on Siit Ultra and California Municipal 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 Ultra with a short position of California Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Siit Ultra and California Municipal.

Diversification Opportunities for Siit Ultra and California Municipal

-0.34

Correlation Coefficient

Siit Ultra  California Municipal

Very good diversification

The 3 months correlation between SIIT and California is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Siit Ultra Short and California Municipal Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Municipal and Siit Ultra 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 Ultra Short are associated (or correlated) with California Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Municipal has no effect on the direction of Siit Ultra i.e., Siit Ultra and California Municipal go up and down completely randomly.

Pair Corralation between Siit Ultra and California Municipal

Assuming the 90 days horizon Siit Ultra Short is expected to generate 0.85 times more return on investment than California Municipal. However, Siit Ultra Short is 1.18 times less risky than California Municipal. It trades about 0.14 of its potential returns per unit of risk. California Municipal Portfolio is currently generating about -0.1 per unit of risk. If you would invest  981.00  in Siit Ultra Short on March 4, 2024 and sell it today you would earn a total of  8.00  from holding Siit Ultra Short or generate 0.82% return on investment over 90 days.

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

Siit Ultra Short  vs.  California Municipal Portfolio

Siit Ultra Short

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Siit Ultra Short are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Siit Ultra is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

California Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Siit Ultra and California Municipal

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

The idea behind Siit Ultra Short and California Municipal Portfolio 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 Transaction History module to view history of all your transactions and understand their impact on performance.