Correlation Between The National and Sterling Capital
Can any of the company-specific risk be diversified away by investing in both The National and Sterling Capital 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 The National and Sterling Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The National Tax Free and Sterling Capital South, you can compare the effects of market volatilities on The National and Sterling Capital 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 The National with a short position of Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of The National and Sterling Capital.
Diversification Opportunities for The National and Sterling Capital
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between The and Sterling is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding The National Tax Free and Sterling Capital South in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital South and The National 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 The National Tax Free are associated (or correlated) with Sterling Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Capital South has no effect on the direction of The National i.e., The National and Sterling Capital go up and down completely randomly.
Pair Corralation between The National and Sterling Capital
Assuming the 90 days horizon The National Tax Free is expected to generate 1.28 times more return on investment than Sterling Capital. However, The National is 1.28 times more volatile than Sterling Capital South. It trades about 0.06 of its potential returns per unit of risk. Sterling Capital South is currently generating about 0.04 per unit of risk. If you would invest 1,771 in The National Tax Free on September 4, 2024 and sell it today you would earn a total of 110.00 from holding The National Tax Free or generate 6.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The National Tax Free vs. Sterling Capital South
Performance |
| Timeline |
| National Tax |
| Sterling Capital South |
The National and Sterling Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with The National and Sterling Capital
The main advantage of trading using opposite The National and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The National position performs unexpectedly, Sterling Capital 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 Capital will offset losses from the drop in Sterling Capital's long position.| The National vs. The Missouri Tax Free | The National vs. High Yield Municipal Fund | The National vs. Aquagold International | The National vs. Morningstar Unconstrained Allocation |
| Sterling Capital vs. Sterling Capital Equity | Sterling Capital vs. Sterling Capital Behavioral | Sterling Capital vs. Sterling Capital Behavioral | Sterling Capital vs. Sterling Capital Behavioral |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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