Correlation Between Sterling Construction and Auto Trader
Can any of the company-specific risk be diversified away by investing in both Sterling Construction and Auto Trader 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 Auto Trader into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Construction and Auto Trader Group, you can compare the effects of market volatilities on Sterling Construction and Auto Trader 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 Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Construction and Auto Trader.
Diversification Opportunities for Sterling Construction and Auto Trader
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sterling and Auto is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group 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 Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of Sterling Construction i.e., Sterling Construction and Auto Trader go up and down completely randomly.
Pair Corralation between Sterling Construction and Auto Trader
Assuming the 90 days horizon Sterling Construction is expected to generate 2.29 times more return on investment than Auto Trader. However, Sterling Construction is 2.29 times more volatile than Auto Trader Group. It trades about 0.28 of its potential returns per unit of risk. Auto Trader Group is currently generating about -0.03 per unit of risk. If you would invest 14,125 in Sterling Construction on September 1, 2024 and sell it today you would earn a total of 4,185 from holding Sterling Construction or generate 29.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sterling Construction vs. Auto Trader Group
Performance |
| Timeline |
| Sterling Construction |
| Auto Trader Group |
Sterling Construction and Auto Trader Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Construction and Auto Trader
The main advantage of trading using opposite Sterling Construction and Auto Trader positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Construction position performs unexpectedly, Auto Trader 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 Auto Trader will offset losses from the drop in Auto Trader'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 |
| Auto Trader vs. FORMPIPE SOFTWARE AB | Auto Trader vs. UNITED UTILITIES GR | Auto Trader vs. COPLAND ROAD CAPITAL | Auto Trader vs. Algonquin Power Utilities |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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