Correlation Between Sterling Construction and Nufarm
Can any of the company-specific risk be diversified away by investing in both Sterling Construction and Nufarm 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 Nufarm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Construction and Nufarm Limited, you can compare the effects of market volatilities on Sterling Construction and Nufarm 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 Nufarm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Construction and Nufarm.
Diversification Opportunities for Sterling Construction and Nufarm
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sterling and Nufarm is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and Nufarm Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm Limited 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 Nufarm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nufarm Limited has no effect on the direction of Sterling Construction i.e., Sterling Construction and Nufarm go up and down completely randomly.
Pair Corralation between Sterling Construction and Nufarm
Assuming the 90 days horizon Sterling Construction is expected to generate 1.65 times more return on investment than Nufarm. However, Sterling Construction is 1.65 times more volatile than Nufarm Limited. It trades about 0.13 of its potential returns per unit of risk. Nufarm Limited is currently generating about -0.03 per unit of risk. If you would invest 3,060 in Sterling Construction on August 28, 2024 and sell it today you would earn a total of 15,695 from holding Sterling Construction or generate 512.91% 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. Nufarm Limited
Performance |
| Timeline |
| Sterling Construction |
| Nufarm Limited |
Sterling Construction and Nufarm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Construction and Nufarm
The main advantage of trading using opposite Sterling Construction and Nufarm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Construction position performs unexpectedly, Nufarm 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 Nufarm will offset losses from the drop in Nufarm's long position.| Sterling Construction vs. China Railway Construction | Sterling Construction vs. AECOM | Sterling Construction vs. Superior Plus Corp | Sterling Construction vs. NMI Holdings |
| Nufarm vs. Superior Plus Corp | Nufarm vs. NMI Holdings | Nufarm vs. Origin Agritech | Nufarm vs. SIVERS SEMICONDUCTORS AB |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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