Correlation Between Sterling Capital and Northern International
Can any of the company-specific risk be diversified away by investing in both Sterling Capital and Northern International 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 Northern International 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 Northern International Equity, you can compare the effects of market volatilities on Sterling Capital and Northern International 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 Northern International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Capital and Northern International.
Diversification Opportunities for Sterling Capital and Northern International
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sterling and Northern is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Capital Short and Northern International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern International 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 Northern International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern International has no effect on the direction of Sterling Capital i.e., Sterling Capital and Northern International go up and down completely randomly.
Pair Corralation between Sterling Capital and Northern International
Assuming the 90 days horizon Sterling Capital is expected to generate 2.72 times less return on investment than Northern International. But when comparing it to its historical volatility, Sterling Capital Short is 5.58 times less risky than Northern International. It trades about 0.18 of its potential returns per unit of risk. Northern International Equity is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 886.00 in Northern International Equity on September 1, 2024 and sell it today you would earn a total of 173.00 from holding Northern International Equity or generate 19.53% 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. Northern International Equity
Performance |
| Timeline |
| Sterling Capital Short |
| Northern International |
Sterling Capital and Northern International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Capital and Northern International
The main advantage of trading using opposite Sterling Capital and Northern International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Capital position performs unexpectedly, Northern International 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 Northern International will offset losses from the drop in Northern International's 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 |
| Northern International vs. Federated Institutional High | Northern International vs. Multi Manager High Yield | Northern International vs. Pace High Yield | Northern International vs. Mesirow Financial High |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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