Correlation Between GOODYEAR T and Sterling Construction
Can any of the company-specific risk be diversified away by investing in both GOODYEAR T and Sterling Construction 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 GOODYEAR T and Sterling Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GOODYEAR T RUBBER and Sterling Construction, you can compare the effects of market volatilities on GOODYEAR T and Sterling Construction 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 GOODYEAR T with a short position of Sterling Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of GOODYEAR T and Sterling Construction.
Diversification Opportunities for GOODYEAR T and Sterling Construction
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GOODYEAR and Sterling is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding GOODYEAR T RUBBER and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction and GOODYEAR T 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 GOODYEAR T RUBBER are associated (or correlated) with Sterling Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Construction has no effect on the direction of GOODYEAR T i.e., GOODYEAR T and Sterling Construction go up and down completely randomly.
Pair Corralation between GOODYEAR T and Sterling Construction
Assuming the 90 days trading horizon GOODYEAR T is expected to generate 1.43 times less return on investment than Sterling Construction. But when comparing it to its historical volatility, GOODYEAR T RUBBER is 1.96 times less risky than Sterling Construction. It trades about 0.16 of its potential returns per unit of risk. Sterling Construction is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 16,435 in Sterling Construction on October 28, 2024 and sell it today you would earn a total of 1,285 from holding Sterling Construction or generate 7.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
GOODYEAR T RUBBER vs. Sterling Construction
Performance |
| Timeline |
| GOODYEAR T RUBBER |
| Sterling Construction |
GOODYEAR T and Sterling Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GOODYEAR T and Sterling Construction
The main advantage of trading using opposite GOODYEAR T and Sterling Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GOODYEAR T position performs unexpectedly, Sterling Construction 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 Construction will offset losses from the drop in Sterling Construction's long position.| GOODYEAR T vs. SOCKET MOBILE NEW | GOODYEAR T vs. Iridium Communications | GOODYEAR T vs. Align Technology | GOODYEAR T vs. Casio Computer CoLtd |
| Sterling Construction vs. MOVIE GAMES SA | Sterling Construction vs. DFS Furniture PLC | Sterling Construction vs. GOODYEAR T RUBBER | Sterling Construction vs. Compagnie Plastic Omnium |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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