Correlation Between Sterling Construction and Abbott Laboratories
Can any of the company-specific risk be diversified away by investing in both Sterling Construction and Abbott Laboratories 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 Abbott Laboratories into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Construction and Abbott Laboratories, you can compare the effects of market volatilities on Sterling Construction and Abbott Laboratories 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 Abbott Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Construction and Abbott Laboratories.
Diversification Opportunities for Sterling Construction and Abbott Laboratories
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sterling and Abbott is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and Abbott Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abbott Laboratories 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 Abbott Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abbott Laboratories has no effect on the direction of Sterling Construction i.e., Sterling Construction and Abbott Laboratories go up and down completely randomly.
Pair Corralation between Sterling Construction and Abbott Laboratories
Assuming the 90 days horizon Sterling Construction is expected to generate 2.45 times more return on investment than Abbott Laboratories. However, Sterling Construction is 2.45 times more volatile than Abbott Laboratories. It trades about 0.12 of its potential returns per unit of risk. Abbott Laboratories is currently generating about 0.03 per unit of risk. If you would invest 3,340 in Sterling Construction on October 28, 2024 and sell it today you would earn a total of 14,380 from holding Sterling Construction or generate 430.54% 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. Abbott Laboratories
Performance |
| Timeline |
| Sterling Construction |
| Abbott Laboratories |
Sterling Construction and Abbott Laboratories Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Construction and Abbott Laboratories
The main advantage of trading using opposite Sterling Construction and Abbott Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Construction position performs unexpectedly, Abbott Laboratories 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 Abbott Laboratories will offset losses from the drop in Abbott Laboratories' long position.| Sterling Construction vs. MOVIE GAMES SA | Sterling Construction vs. DFS Furniture PLC | Sterling Construction vs. GOODYEAR T RUBBER | Sterling Construction vs. Compagnie Plastic Omnium |
| Abbott Laboratories vs. Daito Trust Construction | Abbott Laboratories vs. Xenia Hotels Resorts | Abbott Laboratories vs. Sumitomo Mitsui Construction | Abbott Laboratories vs. NH HOTEL GROUP |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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