Correlation Between Sterling Capital and American Funds
Can any of the company-specific risk be diversified away by investing in both Sterling Capital and American Funds 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 Sterling Capital and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Capital Short and American Funds 2045, you can compare the effects of market volatilities on Sterling Capital and American Funds 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 Sterling Capital with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Capital and American Funds.
Diversification Opportunities for Sterling Capital and American Funds
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Sterling and AMERICAN is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Capital Short and American Funds 2045 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2045 and Sterling Capital 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 Sterling Capital Short are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds 2045 has no effect on the direction of Sterling Capital i.e., Sterling Capital and American Funds go up and down completely randomly.
Pair Corralation between Sterling Capital and American Funds
Assuming the 90 days horizon Sterling Capital is expected to generate 4.21 times less return on investment than American Funds. But when comparing it to its historical volatility, Sterling Capital Short is 4.84 times less risky than American Funds. It trades about 0.18 of its potential returns per unit of risk. American Funds 2045 is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,664 in American Funds 2045 on September 1, 2024 and sell it today you would earn a total of 543.00 from holding American Funds 2045 or generate 32.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.63% |
| Values | Daily Returns |
Sterling Capital Short vs. American Funds 2045
Performance |
| Timeline |
| Sterling Capital Short |
| American Funds 2045 |
Sterling Capital and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Capital and American Funds
The main advantage of trading using opposite Sterling Capital and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Capital position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Sterling Capital vs. Sterling Capital Equity | Sterling Capital vs. Sterling Capital Behavioral | Sterling Capital vs. Sterling Capital South | Sterling Capital vs. Sterling Capital South |
| American Funds vs. Income Fund Of | American Funds vs. New World Fund | American Funds vs. American Mutual Fund | American Funds vs. American Mutual Fund |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
Other Complementary Tools
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios |