Correlation Between Stag Industrial and Sterling Construction
Can any of the company-specific risk be diversified away by investing in both Stag Industrial 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 Stag Industrial and Sterling Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stag Industrial and Sterling Construction, you can compare the effects of market volatilities on Stag Industrial 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 Stag Industrial with a short position of Sterling Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stag Industrial and Sterling Construction.
Diversification Opportunities for Stag Industrial and Sterling Construction
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Stag and Sterling is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Stag Industrial and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction and Stag Industrial 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 Stag Industrial 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 Stag Industrial i.e., Stag Industrial and Sterling Construction go up and down completely randomly.
Pair Corralation between Stag Industrial and Sterling Construction
Assuming the 90 days trading horizon Stag Industrial is expected to under-perform the Sterling Construction. But the stock apears to be less risky and, when comparing its historical volatility, Stag Industrial is 2.83 times less risky than Sterling Construction. The stock trades about -0.12 of its potential returns per unit of risk. The Sterling Construction is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 18,310 in Sterling Construction on October 30, 2024 and sell it today you would lose (750.00) from holding Sterling Construction or give up 4.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stag Industrial vs. Sterling Construction
Performance |
| Timeline |
| Stag Industrial |
| Sterling Construction |
Stag Industrial and Sterling Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stag Industrial and Sterling Construction
The main advantage of trading using opposite Stag Industrial and Sterling Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stag Industrial 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.| Stag Industrial vs. SENECA FOODS A | Stag Industrial vs. CODERE ONLINE LUX | Stag Industrial vs. THAI BEVERAGE | Stag Industrial vs. PATTIES FOODS |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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