Correlation Between Davis Real and Sterling Capital
Can any of the company-specific risk be diversified away by investing in both Davis Real 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 Davis Real and Sterling Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Davis Real Estate and Sterling Capital Stratton, you can compare the effects of market volatilities on Davis Real 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 Davis Real with a short position of Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Real and Sterling Capital.
Diversification Opportunities for Davis Real and Sterling Capital
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Davis and Sterling is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Davis Real Estate and Sterling Capital Stratton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Stratton and Davis Real 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 Davis Real Estate 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 Stratton has no effect on the direction of Davis Real i.e., Davis Real and Sterling Capital go up and down completely randomly.
Pair Corralation between Davis Real and Sterling Capital
Assuming the 90 days horizon Davis Real is expected to generate 1.26 times less return on investment than Sterling Capital. In addition to that, Davis Real is 1.07 times more volatile than Sterling Capital Stratton. It trades about 0.19 of its total potential returns per unit of risk. Sterling Capital Stratton is currently generating about 0.25 per unit of volatility. If you would invest 3,866 in Sterling Capital Stratton on September 1, 2024 and sell it today you would earn a total of 186.00 from holding Sterling Capital Stratton or generate 4.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Davis Real Estate vs. Sterling Capital Stratton
Performance |
| Timeline |
| Davis Real Estate |
| Sterling Capital Stratton |
Davis Real and Sterling Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Davis Real and Sterling Capital
The main advantage of trading using opposite Davis Real and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davis Real 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.| Davis Real vs. Volumetric Fund Volumetric | Davis Real vs. Semiconductor Ultrasector Profund | Davis Real vs. Artisan Thematic Fund | Davis Real vs. Commonwealth Global Fund |
| Sterling Capital vs. Realty Income | Sterling Capital vs. Dynex Capital | Sterling Capital vs. First Industrial Realty | Sterling Capital vs. Healthcare Realty Trust |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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