Correlation Between COFACE SA and Sterling Construction
Can any of the company-specific risk be diversified away by investing in both COFACE SA 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 COFACE SA and Sterling Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between COFACE SA and Sterling Construction, you can compare the effects of market volatilities on COFACE SA 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 COFACE SA with a short position of Sterling Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of COFACE SA and Sterling Construction.
Diversification Opportunities for COFACE SA and Sterling Construction
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between COFACE and Sterling is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding COFACE SA and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction and COFACE SA 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 COFACE SA 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 COFACE SA i.e., COFACE SA and Sterling Construction go up and down completely randomly.
Pair Corralation between COFACE SA and Sterling Construction
Assuming the 90 days horizon COFACE SA is expected to generate 0.43 times more return on investment than Sterling Construction. However, COFACE SA is 2.35 times less risky than Sterling Construction. It trades about -0.3 of its potential returns per unit of risk. Sterling Construction is currently generating about -0.18 per unit of risk. If you would invest 1,472 in COFACE SA on September 24, 2024 and sell it today you would lose (98.00) from holding COFACE SA or give up 6.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
COFACE SA vs. Sterling Construction
Performance |
| Timeline |
| COFACE SA |
| Sterling Construction |
COFACE SA and Sterling Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with COFACE SA and Sterling Construction
The main advantage of trading using opposite COFACE SA and Sterling Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COFACE SA 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.| COFACE SA vs. Sterling Construction | COFACE SA vs. SENECA FOODS A | COFACE SA vs. National Beverage Corp | COFACE SA vs. Dairy Farm International |
| Sterling Construction vs. Iridium Communications | Sterling Construction vs. Zoom Video Communications | Sterling Construction vs. KENNAMETAL INC | Sterling Construction vs. Evolution Mining Limited |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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