Correlation Between Sterling Construction and SUNCOKE ENERGY
Can any of the company-specific risk be diversified away by investing in both Sterling Construction and SUNCOKE ENERGY 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 SUNCOKE ENERGY into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Construction and SUNCOKE ENERGY, you can compare the effects of market volatilities on Sterling Construction and SUNCOKE ENERGY 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 SUNCOKE ENERGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Construction and SUNCOKE ENERGY.
Diversification Opportunities for Sterling Construction and SUNCOKE ENERGY
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sterling and SUNCOKE is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and SUNCOKE ENERGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SUNCOKE ENERGY 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 SUNCOKE ENERGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SUNCOKE ENERGY has no effect on the direction of Sterling Construction i.e., Sterling Construction and SUNCOKE ENERGY go up and down completely randomly.
Pair Corralation between Sterling Construction and SUNCOKE ENERGY
Assuming the 90 days horizon Sterling Construction is expected to generate 1.5 times more return on investment than SUNCOKE ENERGY. However, Sterling Construction is 1.5 times more volatile than SUNCOKE ENERGY. It trades about 0.31 of its potential returns per unit of risk. SUNCOKE ENERGY is currently generating about 0.45 per unit of risk. If you would invest 13,880 in Sterling Construction on September 5, 2024 and sell it today you would earn a total of 4,745 from holding Sterling Construction or generate 34.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Sterling Construction vs. SUNCOKE ENERGY
Performance |
| Timeline |
| Sterling Construction |
| SUNCOKE ENERGY |
Sterling Construction and SUNCOKE ENERGY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Construction and SUNCOKE ENERGY
The main advantage of trading using opposite Sterling Construction and SUNCOKE ENERGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Construction position performs unexpectedly, SUNCOKE ENERGY 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 SUNCOKE ENERGY will offset losses from the drop in SUNCOKE ENERGY's long position.| Sterling Construction vs. Larsen Toubro Limited | Sterling Construction vs. China Railway Group | Sterling Construction vs. Superior Plus Corp | Sterling Construction vs. NMI Holdings |
| SUNCOKE ENERGY vs. TOTAL GABON | SUNCOKE ENERGY vs. Walgreens Boots Alliance | SUNCOKE ENERGY vs. Peak Resources Limited |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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