Correlation Between Sterling Construction and COMMERCIAL VEHICLE
Can any of the company-specific risk be diversified away by investing in both Sterling Construction and COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Construction and COMMERCIAL VEHICLE, you can compare the effects of market volatilities on Sterling Construction and COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Construction and COMMERCIAL VEHICLE.
Diversification Opportunities for Sterling Construction and COMMERCIAL VEHICLE
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sterling and COMMERCIAL is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and COMMERCIAL VEHICLE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMMERCIAL VEHICLE has no effect on the direction of Sterling Construction i.e., Sterling Construction and COMMERCIAL VEHICLE go up and down completely randomly.
Pair Corralation between Sterling Construction and COMMERCIAL VEHICLE
Assuming the 90 days horizon Sterling Construction is expected to generate 1.0 times more return on investment than COMMERCIAL VEHICLE. However, Sterling Construction is 1.0 times less risky than COMMERCIAL VEHICLE. It trades about 0.09 of its potential returns per unit of risk. COMMERCIAL VEHICLE is currently generating about -0.06 per unit of risk. If you would invest 3,860 in Sterling Construction on November 21, 2024 and sell it today you would earn a total of 8,665 from holding Sterling Construction or generate 224.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sterling Construction vs. COMMERCIAL VEHICLE
Performance |
| Timeline |
| Sterling Construction |
| COMMERCIAL VEHICLE |
Sterling Construction and COMMERCIAL VEHICLE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Construction and COMMERCIAL VEHICLE
The main advantage of trading using opposite Sterling Construction and COMMERCIAL VEHICLE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Construction position performs unexpectedly, COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE will offset losses from the drop in COMMERCIAL VEHICLE's long position.| Sterling Construction vs. MAGNUM MINING EXP | Sterling Construction vs. Zijin Mining Group | Sterling Construction vs. United States Steel | Sterling Construction vs. COSMOSTEEL HLDGS |
| COMMERCIAL VEHICLE vs. Apple Inc | COMMERCIAL VEHICLE vs. Apple Inc | COMMERCIAL VEHICLE vs. Apple Inc | COMMERCIAL VEHICLE vs. Apple Inc |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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