Correlation Between Sterling Construction and Avanos Medical
Can any of the company-specific risk be diversified away by investing in both Sterling Construction and Avanos Medical 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 Avanos Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Construction and Avanos Medical, you can compare the effects of market volatilities on Sterling Construction and Avanos Medical 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 Avanos Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Construction and Avanos Medical.
Diversification Opportunities for Sterling Construction and Avanos Medical
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Sterling and Avanos is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and Avanos Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avanos Medical 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 Avanos Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avanos Medical has no effect on the direction of Sterling Construction i.e., Sterling Construction and Avanos Medical go up and down completely randomly.
Pair Corralation between Sterling Construction and Avanos Medical
Assuming the 90 days horizon Sterling Construction is expected to generate 1.55 times more return on investment than Avanos Medical. However, Sterling Construction is 1.55 times more volatile than Avanos Medical. It trades about 0.1 of its potential returns per unit of risk. Avanos Medical is currently generating about -0.06 per unit of risk. If you would invest 9,258 in Sterling Construction on November 3, 2024 and sell it today you would earn a total of 4,182 from holding Sterling Construction or generate 45.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sterling Construction vs. Avanos Medical
Performance |
| Timeline |
| Sterling Construction |
| Avanos Medical |
Sterling Construction and Avanos Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Construction and Avanos Medical
The main advantage of trading using opposite Sterling Construction and Avanos Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Construction position performs unexpectedly, Avanos Medical 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 Avanos Medical will offset losses from the drop in Avanos Medical's long position.| Sterling Construction vs. Vinci S A | Sterling Construction vs. Johnson Controls International | Sterling Construction vs. Larsen Toubro Limited | Sterling Construction vs. China Railway Group |
| Avanos Medical vs. Vienna Insurance Group | Avanos Medical vs. HANOVER INSURANCE | Avanos Medical vs. Singapore Reinsurance | Avanos Medical vs. Direct Line Insurance |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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