Correlation Between Sterling Construction and Plastic Omnium
Can any of the company-specific risk be diversified away by investing in both Sterling Construction and Plastic Omnium 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 Plastic Omnium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Construction and Plastic Omnium, you can compare the effects of market volatilities on Sterling Construction and Plastic Omnium 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 Plastic Omnium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Construction and Plastic Omnium.
Diversification Opportunities for Sterling Construction and Plastic Omnium
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Sterling and Plastic is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and Plastic Omnium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plastic Omnium 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 Plastic Omnium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plastic Omnium has no effect on the direction of Sterling Construction i.e., Sterling Construction and Plastic Omnium go up and down completely randomly.
Pair Corralation between Sterling Construction and Plastic Omnium
Assuming the 90 days horizon Sterling Construction is expected to generate 14.95 times less return on investment than Plastic Omnium. But when comparing it to its historical volatility, Sterling Construction is 1.1 times less risky than Plastic Omnium. It trades about 0.01 of its potential returns per unit of risk. Plastic Omnium is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 897.00 in Plastic Omnium on September 15, 2024 and sell it today you would earn a total of 114.00 from holding Plastic Omnium or generate 12.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sterling Construction vs. Plastic Omnium
Performance |
| Timeline |
| Sterling Construction |
| Plastic Omnium |
Sterling Construction and Plastic Omnium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Construction and Plastic Omnium
The main advantage of trading using opposite Sterling Construction and Plastic Omnium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Construction position performs unexpectedly, Plastic Omnium 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 Plastic Omnium will offset losses from the drop in Plastic Omnium's long position.| Sterling Construction vs. Superior Plus Corp | Sterling Construction vs. SIVERS SEMICONDUCTORS AB | Sterling Construction vs. Norsk Hydro ASA | Sterling Construction vs. Reliance Steel Aluminum |
| Plastic Omnium vs. Austevoll Seafood ASA | Plastic Omnium vs. Sterling Construction | Plastic Omnium vs. Granite Construction | Plastic Omnium vs. TITAN MACHINERY |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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