Correlation Between Sterling Construction and Renesas Electronics
Can any of the company-specific risk be diversified away by investing in both Sterling Construction and Renesas Electronics 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 Renesas Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Construction and Renesas Electronics, you can compare the effects of market volatilities on Sterling Construction and Renesas Electronics 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 Renesas Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Construction and Renesas Electronics.
Diversification Opportunities for Sterling Construction and Renesas Electronics
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sterling and Renesas is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and Renesas Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renesas Electronics 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 Renesas Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renesas Electronics has no effect on the direction of Sterling Construction i.e., Sterling Construction and Renesas Electronics go up and down completely randomly.
Pair Corralation between Sterling Construction and Renesas Electronics
Assuming the 90 days horizon Sterling Construction is expected to generate 1.32 times more return on investment than Renesas Electronics. However, Sterling Construction is 1.32 times more volatile than Renesas Electronics. It trades about 0.24 of its potential returns per unit of risk. Renesas Electronics is currently generating about -0.08 per unit of risk. If you would invest 13,005 in Sterling Construction on September 3, 2024 and sell it today you would earn a total of 5,305 from holding Sterling Construction or generate 40.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sterling Construction vs. Renesas Electronics
Performance |
| Timeline |
| Sterling Construction |
| Renesas Electronics |
Sterling Construction and Renesas Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Construction and Renesas Electronics
The main advantage of trading using opposite Sterling Construction and Renesas Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Construction position performs unexpectedly, Renesas Electronics 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 Renesas Electronics will offset losses from the drop in Renesas Electronics' long position.| Sterling Construction vs. Larsen Toubro Limited | Sterling Construction vs. China Railway Group | Sterling Construction vs. China Communications Construction | Sterling Construction vs. Superior Plus Corp |
| Renesas Electronics vs. NVIDIA | Renesas Electronics vs. Taiwan Semiconductor Manufacturing | Renesas Electronics vs. Advanced Micro Devices | Renesas Electronics vs. Intel |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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