Correlation Between Sterling Construction and Autohome ADR
Can any of the company-specific risk be diversified away by investing in both Sterling Construction and Autohome ADR 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 Autohome ADR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Construction and Autohome ADR, you can compare the effects of market volatilities on Sterling Construction and Autohome ADR 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 Autohome ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Construction and Autohome ADR.
Diversification Opportunities for Sterling Construction and Autohome ADR
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Sterling and Autohome is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and Autohome ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autohome ADR 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 Autohome ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autohome ADR has no effect on the direction of Sterling Construction i.e., Sterling Construction and Autohome ADR go up and down completely randomly.
Pair Corralation between Sterling Construction and Autohome ADR
Assuming the 90 days horizon Sterling Construction is expected to generate 2.24 times more return on investment than Autohome ADR. However, Sterling Construction is 2.24 times more volatile than Autohome ADR. It trades about 0.25 of its potential returns per unit of risk. Autohome ADR is currently generating about -0.09 per unit of risk. If you would invest 14,385 in Sterling Construction on August 30, 2024 and sell it today you would earn a total of 3,990 from holding Sterling Construction or generate 27.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sterling Construction vs. Autohome ADR
Performance |
| Timeline |
| Sterling Construction |
| Autohome ADR |
Sterling Construction and Autohome ADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Construction and Autohome ADR
The main advantage of trading using opposite Sterling Construction and Autohome ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Construction position performs unexpectedly, Autohome ADR 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 Autohome ADR will offset losses from the drop in Autohome ADR's long position.| Sterling Construction vs. QBE Insurance Group | Sterling Construction vs. HK Electric Investments | Sterling Construction vs. REVO INSURANCE SPA | Sterling Construction vs. The Hanover Insurance |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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