Correlation Between Sterling Construction and Townsquare Media
Can any of the company-specific risk be diversified away by investing in both Sterling Construction and Townsquare Media 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 Townsquare Media into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Construction and Townsquare Media, you can compare the effects of market volatilities on Sterling Construction and Townsquare Media 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 Townsquare Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Construction and Townsquare Media.
Diversification Opportunities for Sterling Construction and Townsquare Media
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sterling and Townsquare is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and Townsquare Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Townsquare Media 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 Townsquare Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Townsquare Media has no effect on the direction of Sterling Construction i.e., Sterling Construction and Townsquare Media go up and down completely randomly.
Pair Corralation between Sterling Construction and Townsquare Media
Assuming the 90 days horizon Sterling Construction is expected to generate 1.3 times more return on investment than Townsquare Media. However, Sterling Construction is 1.3 times more volatile than Townsquare Media. It trades about 0.12 of its potential returns per unit of risk. Townsquare Media is currently generating about 0.02 per unit of risk. If you would invest 4,940 in Sterling Construction on September 1, 2024 and sell it today you would earn a total of 13,370 from holding Sterling Construction or generate 270.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sterling Construction vs. Townsquare Media
Performance |
| Timeline |
| Sterling Construction |
| Townsquare Media |
Sterling Construction and Townsquare Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Construction and Townsquare Media
The main advantage of trading using opposite Sterling Construction and Townsquare Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Construction position performs unexpectedly, Townsquare Media 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 Townsquare Media will offset losses from the drop in Townsquare Media's long position.| Sterling Construction vs. Larsen Toubro Limited | Sterling Construction vs. Superior Plus Corp | Sterling Construction vs. NMI Holdings | Sterling Construction vs. Origin Agritech |
| Townsquare Media vs. WIZZ AIR HLDGUNSPADR4 | Townsquare Media vs. AWILCO DRILLING PLC | Townsquare Media vs. American Homes 4 | Townsquare Media vs. Haier Smart Home |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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