Correlation Between RCM TECHNOLOGIES and Sterling Construction
Can any of the company-specific risk be diversified away by investing in both RCM TECHNOLOGIES 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 RCM TECHNOLOGIES and Sterling Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RCM TECHNOLOGIES and Sterling Construction, you can compare the effects of market volatilities on RCM TECHNOLOGIES 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 RCM TECHNOLOGIES with a short position of Sterling Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of RCM TECHNOLOGIES and Sterling Construction.
Diversification Opportunities for RCM TECHNOLOGIES and Sterling Construction
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between RCM and Sterling is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding RCM TECHNOLOGIES and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction and RCM TECHNOLOGIES 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 RCM TECHNOLOGIES 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 RCM TECHNOLOGIES i.e., RCM TECHNOLOGIES and Sterling Construction go up and down completely randomly.
Pair Corralation between RCM TECHNOLOGIES and Sterling Construction
Assuming the 90 days trading horizon RCM TECHNOLOGIES is expected to generate 19.78 times less return on investment than Sterling Construction. In addition to that, RCM TECHNOLOGIES is 1.02 times more volatile than Sterling Construction. It trades about 0.01 of its total potential returns per unit of risk. Sterling Construction is currently generating about 0.14 per unit of volatility. If you would invest 5,850 in Sterling Construction on September 14, 2024 and sell it today you would earn a total of 12,220 from holding Sterling Construction or generate 208.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
RCM TECHNOLOGIES vs. Sterling Construction
Performance |
| Timeline |
| RCM TECHNOLOGIES |
| Sterling Construction |
RCM TECHNOLOGIES and Sterling Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RCM TECHNOLOGIES and Sterling Construction
The main advantage of trading using opposite RCM TECHNOLOGIES and Sterling Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RCM TECHNOLOGIES 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.| RCM TECHNOLOGIES vs. Apple Inc | RCM TECHNOLOGIES vs. Apple Inc | RCM TECHNOLOGIES vs. Apple Inc | RCM TECHNOLOGIES vs. Apple Inc |
| Sterling Construction vs. Superior Plus Corp | Sterling Construction vs. SIVERS SEMICONDUCTORS AB | Sterling Construction vs. Norsk Hydro ASA | Sterling Construction vs. Reliance Steel Aluminum |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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