Correlation Between China Energy and Sterling Construction
Can any of the company-specific risk be diversified away by investing in both China Energy and Sterling Construction 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 China Energy and Sterling Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Energy Engineering and Sterling Construction, you can compare the effects of market volatilities on China Energy and Sterling Construction 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 China Energy with a short position of Sterling Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Energy and Sterling Construction.
Diversification Opportunities for China Energy and Sterling Construction
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between China and Sterling is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding China Energy Engineering and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction and China Energy 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 China Energy Engineering are associated (or correlated) with Sterling Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Construction has no effect on the direction of China Energy i.e., China Energy and Sterling Construction go up and down completely randomly.
Pair Corralation between China Energy and Sterling Construction
Assuming the 90 days horizon China Energy Engineering is expected to generate 1.05 times more return on investment than Sterling Construction. However, China Energy is 1.05 times more volatile than Sterling Construction. It trades about 0.03 of its potential returns per unit of risk. Sterling Construction is currently generating about -0.3 per unit of risk. If you would invest 12.00 in China Energy Engineering on November 22, 2024 and sell it today you would earn a total of 0.00 from holding China Energy Engineering or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
China Energy Engineering vs. Sterling Construction
Performance |
| Timeline |
| China Energy Engineering |
| Sterling Construction |
China Energy and Sterling Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Energy and Sterling Construction
The main advantage of trading using opposite China Energy and Sterling Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Energy position performs unexpectedly, Sterling Construction 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 Sterling Construction will offset losses from the drop in Sterling Construction's long position.| China Energy vs. Dairy Farm International | China Energy vs. STRAYER EDUCATION | China Energy vs. Tokyu Construction Co | China Energy vs. IDP EDUCATION LTD |
| Sterling Construction vs. DETALION GAMES SA | Sterling Construction vs. Zoom Video Communications | Sterling Construction vs. Scientific Games | Sterling Construction vs. GameStop Corp |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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