Correlation Between MasTec and Sterling Construction
Can any of the company-specific risk be diversified away by investing in both MasTec 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 MasTec and Sterling Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MasTec Inc and Sterling Construction, you can compare the effects of market volatilities on MasTec 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 MasTec with a short position of Sterling Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of MasTec and Sterling Construction.
Diversification Opportunities for MasTec and Sterling Construction
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between MasTec and Sterling is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding MasTec Inc and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction and MasTec 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 MasTec Inc 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 MasTec i.e., MasTec and Sterling Construction go up and down completely randomly.
Pair Corralation between MasTec and Sterling Construction
Considering the 90-day investment horizon MasTec is expected to generate 2.03 times less return on investment than Sterling Construction. But when comparing it to its historical volatility, MasTec Inc is 1.54 times less risky than Sterling Construction. It trades about 0.1 of its potential returns per unit of risk. Sterling Construction is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 11,746 in Sterling Construction on August 30, 2024 and sell it today you would earn a total of 7,795 from holding Sterling Construction or generate 66.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MasTec Inc vs. Sterling Construction
Performance |
| Timeline |
| MasTec Inc |
| Sterling Construction |
MasTec and Sterling Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MasTec and Sterling Construction
The main advantage of trading using opposite MasTec and Sterling Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MasTec 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.| MasTec vs. EMCOR Group | MasTec vs. Comfort Systems USA | MasTec vs. Primoris Services | MasTec vs. Granite Construction Incorporated |
| Sterling Construction vs. Dycom Industries | Sterling Construction vs. Innovate Corp | Sterling Construction vs. Energy Services | Sterling Construction vs. Wang Lee Group, |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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