Correlation Between Japan Medical and Sterling Construction
Can any of the company-specific risk be diversified away by investing in both Japan Medical 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 Japan Medical and Sterling Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Japan Medical Dynamic and Sterling Construction, you can compare the effects of market volatilities on Japan Medical 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 Japan Medical with a short position of Sterling Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Medical and Sterling Construction.
Diversification Opportunities for Japan Medical and Sterling Construction
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Japan and Sterling is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Japan Medical Dynamic and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction and Japan Medical 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 Japan Medical Dynamic 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 Japan Medical i.e., Japan Medical and Sterling Construction go up and down completely randomly.
Pair Corralation between Japan Medical and Sterling Construction
Assuming the 90 days horizon Japan Medical Dynamic is expected to generate 0.23 times more return on investment than Sterling Construction. However, Japan Medical Dynamic is 4.3 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 -0.17 per unit of risk. If you would invest 358.00 in Japan Medical Dynamic on November 7, 2024 and sell it today you would earn a total of 18.00 from holding Japan Medical Dynamic or generate 5.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Japan Medical Dynamic vs. Sterling Construction
Performance |
| Timeline |
| Japan Medical Dynamic |
| Sterling Construction |
Japan Medical and Sterling Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Medical and Sterling Construction
The main advantage of trading using opposite Japan Medical and Sterling Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Medical 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.| Japan Medical vs. Singapore Reinsurance | Japan Medical vs. Apollo Investment Corp | Japan Medical vs. Gladstone Investment | Japan Medical vs. Direct Line Insurance |
| Sterling Construction vs. National Beverage Corp | Sterling Construction vs. United Utilities Group | Sterling Construction vs. Tencent Music Entertainment | Sterling Construction vs. Chesapeake Utilities |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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