Correlation Between Sterling Construction and Daito Trust
Can any of the company-specific risk be diversified away by investing in both Sterling Construction and Daito Trust 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 Daito Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Construction and Daito Trust Construction, you can compare the effects of market volatilities on Sterling Construction and Daito Trust 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 Daito Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Construction and Daito Trust.
Diversification Opportunities for Sterling Construction and Daito Trust
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sterling and Daito is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and Daito Trust Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daito Trust Construction 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 Daito Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daito Trust Construction has no effect on the direction of Sterling Construction i.e., Sterling Construction and Daito Trust go up and down completely randomly.
Pair Corralation between Sterling Construction and Daito Trust
Assuming the 90 days horizon Sterling Construction is expected to generate 2.31 times more return on investment than Daito Trust. However, Sterling Construction is 2.31 times more volatile than Daito Trust Construction. It trades about 0.12 of its potential returns per unit of risk. Daito Trust Construction is currently generating about 0.05 per unit of risk. If you would invest 11,210 in Sterling Construction on August 31, 2024 and sell it today you would earn a total of 7,100 from holding Sterling Construction or generate 63.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.23% |
| Values | Daily Returns |
Sterling Construction vs. Daito Trust Construction
Performance |
| Timeline |
| Sterling Construction |
| Daito Trust Construction |
Sterling Construction and Daito Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Construction and Daito Trust
The main advantage of trading using opposite Sterling Construction and Daito Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Construction position performs unexpectedly, Daito Trust 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 Daito Trust will offset losses from the drop in Daito Trust'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 |
| Daito Trust vs. Auto Trader Group | Daito Trust vs. Air New Zealand | Daito Trust vs. Altair Engineering | Daito Trust vs. WIZZ AIR HLDGUNSPADR4 |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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