Correlation Between Sterling Construction and China Resources
Can any of the company-specific risk be diversified away by investing in both Sterling Construction and China Resources 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 China Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Construction and China Resources Beer, you can compare the effects of market volatilities on Sterling Construction and China Resources 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 China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Construction and China Resources.
Diversification Opportunities for Sterling Construction and China Resources
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sterling and China is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and China Resources Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Beer 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 China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Beer has no effect on the direction of Sterling Construction i.e., Sterling Construction and China Resources go up and down completely randomly.
Pair Corralation between Sterling Construction and China Resources
Assuming the 90 days horizon Sterling Construction is expected to under-perform the China Resources. In addition to that, Sterling Construction is 1.68 times more volatile than China Resources Beer. It trades about -0.1 of its total potential returns per unit of risk. China Resources Beer is currently generating about 0.13 per unit of volatility. If you would invest 298.00 in China Resources Beer on December 1, 2024 and sell it today you would earn a total of 20.00 from holding China Resources Beer or generate 6.71% 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. China Resources Beer
Performance |
| Timeline |
| Sterling Construction |
| China Resources Beer |
Sterling Construction and China Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Construction and China Resources
The main advantage of trading using opposite Sterling Construction and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Construction position performs unexpectedly, China Resources 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 China Resources will offset losses from the drop in China Resources' long position.| Sterling Construction vs. Lendlease Group | Sterling Construction vs. Altair Engineering | Sterling Construction vs. FUYO GENERAL LEASE | Sterling Construction vs. DELTA AIR LINES |
| China Resources vs. PROSIEBENSAT1 MEDIADR4 | China Resources vs. Cairo Communication SpA | China Resources vs. Ribbon Communications | China Resources vs. Comba Telecom Systems |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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