Correlation Between Sterling Construction and Matrix Service
Can any of the company-specific risk be diversified away by investing in both Sterling Construction and Matrix Service 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 Construction and Matrix Service into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Construction and Matrix Service Co, you can compare the effects of market volatilities on Sterling Construction and Matrix Service 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 Construction with a short position of Matrix Service. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Construction and Matrix Service.
Diversification Opportunities for Sterling Construction and Matrix Service
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sterling and Matrix is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and Matrix Service Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matrix Service and Sterling Construction 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 Construction are associated (or correlated) with Matrix Service. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matrix Service has no effect on the direction of Sterling Construction i.e., Sterling Construction and Matrix Service go up and down completely randomly.
Pair Corralation between Sterling Construction and Matrix Service
Given the investment horizon of 90 days Sterling Construction is expected to generate 0.99 times more return on investment than Matrix Service. However, Sterling Construction is 1.01 times less risky than Matrix Service. It trades about 0.1 of its potential returns per unit of risk. Matrix Service Co is currently generating about 0.06 per unit of risk. If you would invest 3,671 in Sterling Construction on November 2, 2024 and sell it today you would earn a total of 11,000 from holding Sterling Construction or generate 299.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sterling Construction vs. Matrix Service Co
Performance |
| Timeline |
| Sterling Construction |
| Matrix Service |
Sterling Construction and Matrix Service Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Construction and Matrix Service
The main advantage of trading using opposite Sterling Construction and Matrix Service positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Construction position performs unexpectedly, Matrix Service 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 Matrix Service will offset losses from the drop in Matrix Service's long position.| Sterling Construction vs. EMCOR Group | Sterling Construction vs. Comfort Systems USA | Sterling Construction vs. Primoris Services | Sterling Construction vs. Granite Construction Incorporated |
| Matrix Service vs. EMCOR Group | Matrix Service vs. Comfort Systems USA | Matrix Service vs. Primoris Services | Matrix Service vs. Granite Construction Incorporated |
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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