Correlation Between Overlay Shares and Sterling Capital
Can any of the company-specific risk be diversified away by investing in both Overlay Shares 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 Overlay Shares and Sterling Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Overlay Shares Hedged and Sterling Capital Focus, you can compare the effects of market volatilities on Overlay Shares 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 Overlay Shares with a short position of Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Overlay Shares and Sterling Capital.
Diversification Opportunities for Overlay Shares and Sterling Capital
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Overlay and Sterling is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Overlay Shares Hedged and Sterling Capital Focus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Focus and Overlay Shares 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 Overlay Shares Hedged 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 Focus has no effect on the direction of Overlay Shares i.e., Overlay Shares and Sterling Capital go up and down completely randomly.
Pair Corralation between Overlay Shares and Sterling Capital
Given the investment horizon of 90 days Overlay Shares is expected to generate 1.71 times less return on investment than Sterling Capital. But when comparing it to its historical volatility, Overlay Shares Hedged is 2.3 times less risky than Sterling Capital. It trades about 0.17 of its potential returns per unit of risk. Sterling Capital Focus is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,613 in Sterling Capital Focus on September 1, 2024 and sell it today you would earn a total of 527.00 from holding Sterling Capital Focus or generate 20.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Overlay Shares Hedged vs. Sterling Capital Focus
Performance |
| Timeline |
| Overlay Shares Hedged |
| Sterling Capital Focus |
Overlay Shares and Sterling Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Overlay Shares and Sterling Capital
The main advantage of trading using opposite Overlay Shares and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Overlay Shares 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.| Overlay Shares vs. Vanguard Total Stock | Overlay Shares vs. SPDR SP 500 | Overlay Shares vs. iShares Core SP | Overlay Shares vs. Vanguard Dividend Appreciation |
| Sterling Capital vs. Vanguard Growth Index | Sterling Capital vs. iShares Russell 1000 | Sterling Capital vs. iShares SP 500 | Sterling Capital vs. iShares Core SP |
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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