Correlation Between Sterling Construction and Global Fashion
Can any of the company-specific risk be diversified away by investing in both Sterling Construction and Global Fashion 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 Global Fashion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Construction and Global Fashion Group, you can compare the effects of market volatilities on Sterling Construction and Global Fashion 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 Global Fashion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Construction and Global Fashion.
Diversification Opportunities for Sterling Construction and Global Fashion
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sterling and Global is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and Global Fashion Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Fashion Group 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 Global Fashion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Fashion Group has no effect on the direction of Sterling Construction i.e., Sterling Construction and Global Fashion go up and down completely randomly.
Pair Corralation between Sterling Construction and Global Fashion
Assuming the 90 days horizon Sterling Construction is expected to generate 1.55 times more return on investment than Global Fashion. However, Sterling Construction is 1.55 times more volatile than Global Fashion Group. It trades about 0.29 of its potential returns per unit of risk. Global Fashion Group is currently generating about -0.23 per unit of risk. If you would invest 13,985 in Sterling Construction on September 2, 2024 and sell it today you would earn a total of 4,325 from holding Sterling Construction or generate 30.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sterling Construction vs. Global Fashion Group
Performance |
| Timeline |
| Sterling Construction |
| Global Fashion Group |
Sterling Construction and Global Fashion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Construction and Global Fashion
The main advantage of trading using opposite Sterling Construction and Global Fashion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Construction position performs unexpectedly, Global Fashion 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 Global Fashion will offset losses from the drop in Global Fashion's long position.| Sterling Construction vs. Larsen Toubro Limited | Sterling Construction vs. Superior Plus Corp | Sterling Construction vs. NMI Holdings | Sterling Construction vs. Origin Agritech |
| Global Fashion vs. Marie Brizard Wine | Global Fashion vs. MTI WIRELESS EDGE | Global Fashion vs. BRIT AMER TOBACCO | Global Fashion vs. IMPERIAL TOBACCO |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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