Correlation Between Sterling Metals and Tree Island
Can any of the company-specific risk be diversified away by investing in both Sterling Metals and Tree Island 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 Sterling Metals and Tree Island into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Metals Corp and Tree Island Steel, you can compare the effects of market volatilities on Sterling Metals and Tree Island 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 Sterling Metals with a short position of Tree Island. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Metals and Tree Island.
Diversification Opportunities for Sterling Metals and Tree Island
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sterling and Tree is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Metals Corp and Tree Island Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tree Island Steel and Sterling Metals 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 Sterling Metals Corp are associated (or correlated) with Tree Island. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tree Island Steel has no effect on the direction of Sterling Metals i.e., Sterling Metals and Tree Island go up and down completely randomly.
Pair Corralation between Sterling Metals and Tree Island
Assuming the 90 days horizon Sterling Metals Corp is expected to under-perform the Tree Island. In addition to that, Sterling Metals is 2.97 times more volatile than Tree Island Steel. It trades about -0.25 of its total potential returns per unit of risk. Tree Island Steel is currently generating about 0.04 per unit of volatility. If you would invest 209.00 in Tree Island Steel on August 31, 2024 and sell it today you would earn a total of 3.00 from holding Tree Island Steel or generate 1.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sterling Metals Corp vs. Tree Island Steel
Performance |
| Timeline |
| Sterling Metals Corp |
| Tree Island Steel |
Sterling Metals and Tree Island Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Metals and Tree Island
The main advantage of trading using opposite Sterling Metals and Tree Island positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Metals position performs unexpectedly, Tree Island 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 Tree Island will offset losses from the drop in Tree Island's long position.| Sterling Metals vs. Progressive Planet Solutions | Sterling Metals vs. Durango Resources | Sterling Metals vs. Avarone Metals | Sterling Metals vs. Mundoro Capital |
| Tree Island vs. FS Energy and | Tree Island vs. Business Development Corp | Tree Island vs. Inpex Corp ADR |
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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