Correlation Between Sterling Construction and CNH Industrial
Can any of the company-specific risk be diversified away by investing in both Sterling Construction and CNH Industrial 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 CNH Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Construction and CNH Industrial NV, you can compare the effects of market volatilities on Sterling Construction and CNH Industrial 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 CNH Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Construction and CNH Industrial.
Diversification Opportunities for Sterling Construction and CNH Industrial
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sterling and CNH is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and CNH Industrial NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNH Industrial NV 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 CNH Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNH Industrial NV has no effect on the direction of Sterling Construction i.e., Sterling Construction and CNH Industrial go up and down completely randomly.
Pair Corralation between Sterling Construction and CNH Industrial
Assuming the 90 days horizon Sterling Construction is expected to generate 1.95 times more return on investment than CNH Industrial. However, Sterling Construction is 1.95 times more volatile than CNH Industrial NV. It trades about 0.26 of its potential returns per unit of risk. CNH Industrial NV is currently generating about 0.34 per unit of risk. If you would invest 16,435 in Sterling Construction on October 25, 2024 and sell it today you would earn a total of 2,775 from holding Sterling Construction or generate 16.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 94.44% |
| Values | Daily Returns |
Sterling Construction vs. CNH Industrial NV
Performance |
| Timeline |
| Sterling Construction |
| CNH Industrial NV |
Sterling Construction and CNH Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Construction and CNH Industrial
The main advantage of trading using opposite Sterling Construction and CNH Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Construction position performs unexpectedly, CNH Industrial 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 CNH Industrial will offset losses from the drop in CNH Industrial's long position.| Sterling Construction vs. GREENX METALS LTD | Sterling Construction vs. Scientific Games | Sterling Construction vs. Boyd Gaming | Sterling Construction vs. Yuexiu Transport Infrastructure |
| CNH Industrial vs. Jacquet Metal Service | CNH Industrial vs. FIREWEED METALS P | CNH Industrial vs. PLAYMATES TOYS | CNH Industrial vs. DAIDO METAL TD |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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