Correlation Between Entain Plc and Sterling Construction
Can any of the company-specific risk be diversified away by investing in both Entain Plc 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 Entain Plc and Sterling Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Entain Plc and Sterling Construction, you can compare the effects of market volatilities on Entain Plc 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 Entain Plc with a short position of Sterling Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Entain Plc and Sterling Construction.
Diversification Opportunities for Entain Plc and Sterling Construction
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Entain and Sterling is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Entain Plc and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction and Entain Plc 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 Entain Plc 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 Entain Plc i.e., Entain Plc and Sterling Construction go up and down completely randomly.
Pair Corralation between Entain Plc and Sterling Construction
Assuming the 90 days horizon Entain Plc is expected to generate 2.96 times less return on investment than Sterling Construction. But when comparing it to its historical volatility, Entain Plc is 2.07 times less risky than Sterling Construction. It trades about 0.21 of its potential returns per unit of risk. Sterling Construction is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 13,880 in Sterling Construction on September 4, 2024 and sell it today you would earn a total of 4,430 from holding Sterling Construction or generate 31.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Entain Plc vs. Sterling Construction
Performance |
| Timeline |
| Entain Plc |
| Sterling Construction |
Entain Plc and Sterling Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Entain Plc and Sterling Construction
The main advantage of trading using opposite Entain Plc and Sterling Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Entain Plc 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.| Entain Plc vs. Wyndham Hotels Resorts | Entain Plc vs. Meli Hotels International | Entain Plc vs. Southwest Airlines Co | Entain Plc vs. Playa Hotels Resorts |
| Sterling Construction vs. Larsen Toubro Limited | Sterling Construction vs. China Railway Group | Sterling Construction vs. China Communications Construction | Sterling Construction vs. Superior Plus 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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