Correlation Between IMPERIAL TOBACCO and Sterling Construction
Can any of the company-specific risk be diversified away by investing in both IMPERIAL TOBACCO 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 IMPERIAL TOBACCO and Sterling Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IMPERIAL TOBACCO and Sterling Construction, you can compare the effects of market volatilities on IMPERIAL TOBACCO 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 IMPERIAL TOBACCO with a short position of Sterling Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of IMPERIAL TOBACCO and Sterling Construction.
Diversification Opportunities for IMPERIAL TOBACCO and Sterling Construction
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between IMPERIAL and Sterling is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO 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 IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and Sterling Construction go up and down completely randomly.
Pair Corralation between IMPERIAL TOBACCO and Sterling Construction
Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to generate 0.13 times more return on investment than Sterling Construction. However, IMPERIAL TOBACCO is 7.64 times less risky than Sterling Construction. It trades about 0.3 of its potential returns per unit of risk. Sterling Construction is currently generating about -0.17 per unit of risk. If you would invest 3,131 in IMPERIAL TOBACCO on November 7, 2024 and sell it today you would earn a total of 167.00 from holding IMPERIAL TOBACCO or generate 5.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
IMPERIAL TOBACCO vs. Sterling Construction
Performance |
| Timeline |
| IMPERIAL TOBACCO |
| Sterling Construction |
IMPERIAL TOBACCO and Sterling Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IMPERIAL TOBACCO and Sterling Construction
The main advantage of trading using opposite IMPERIAL TOBACCO and Sterling Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IMPERIAL TOBACCO 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.| IMPERIAL TOBACCO vs. Jacquet Metal Service | IMPERIAL TOBACCO vs. Yuexiu Transport Infrastructure | IMPERIAL TOBACCO vs. COPLAND ROAD CAPITAL | IMPERIAL TOBACCO vs. Broadcom |
| Sterling Construction vs. EMBARK EDUCATION LTD | Sterling Construction vs. Transport International Holdings | Sterling Construction vs. JD SPORTS FASH | Sterling Construction vs. Perdoceo Education |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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