Correlation Between Sterling Capital and California Bond
Can any of the company-specific risk be diversified away by investing in both Sterling Capital and California Bond 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 California Bond 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 California Bond Fund, you can compare the effects of market volatilities on Sterling Capital and California Bond 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 California Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Capital and California Bond.
Diversification Opportunities for Sterling Capital and California Bond
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sterling and California is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Capital Short and California Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Bond 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 California Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Bond has no effect on the direction of Sterling Capital i.e., Sterling Capital and California Bond go up and down completely randomly.
Pair Corralation between Sterling Capital and California Bond
Assuming the 90 days horizon Sterling Capital is expected to generate 1.25 times less return on investment than California Bond. But when comparing it to its historical volatility, Sterling Capital Short is 1.79 times less risky than California Bond. It trades about 0.19 of its potential returns per unit of risk. California Bond Fund is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,012 in California Bond Fund on September 1, 2024 and sell it today you would earn a total of 39.00 from holding California Bond Fund or generate 3.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sterling Capital Short vs. California Bond Fund
Performance |
| Timeline |
| Sterling Capital Short |
| California Bond |
Sterling Capital and California Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Capital and California Bond
The main advantage of trading using opposite Sterling Capital and California Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Capital position performs unexpectedly, California Bond 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 California Bond will offset losses from the drop in California Bond'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 |
| California Bond vs. Income Fund Income | California Bond vs. Usaa Nasdaq 100 | California Bond vs. Intermediate Term Bond Fund | California Bond vs. Usaa Intermediate Term |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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