Correlation Between American Funds and Sterling Capital
Can any of the company-specific risk be diversified away by investing in both American Funds 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 American Funds and Sterling Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds American and Sterling Capital Equity, you can compare the effects of market volatilities on American Funds 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 American Funds with a short position of Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Sterling Capital.
Diversification Opportunities for American Funds and Sterling Capital
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Sterling is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding American Funds American and Sterling Capital Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Equity and American Funds 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 American Funds American 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 Equity has no effect on the direction of American Funds i.e., American Funds and Sterling Capital go up and down completely randomly.
Pair Corralation between American Funds and Sterling Capital
Assuming the 90 days horizon American Funds is expected to generate 1.42 times less return on investment than Sterling Capital. But when comparing it to its historical volatility, American Funds American is 1.24 times less risky than Sterling Capital. It trades about 0.24 of its potential returns per unit of risk. Sterling Capital Equity is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 2,825 in Sterling Capital Equity on September 1, 2024 and sell it today you would earn a total of 132.00 from holding Sterling Capital Equity or generate 4.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
American Funds American vs. Sterling Capital Equity
Performance |
| Timeline |
| American Funds American |
| Sterling Capital Equity |
American Funds and Sterling Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Sterling Capital
The main advantage of trading using opposite American Funds and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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.| American Funds vs. Vanguard Developed Markets | American Funds vs. Pnc Emerging Markets | American Funds vs. Transamerica Emerging Markets | American Funds vs. Ep Emerging Markets |
| Sterling Capital vs. Sterling Capital Special | Sterling Capital vs. Sterling Capital Total | Sterling Capital vs. Touchstone Sands Capital | Sterling Capital vs. Aquagold International |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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