Correlation Between Sterling Construction and US Physical
Can any of the company-specific risk be diversified away by investing in both Sterling Construction and US Physical 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 US Physical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Construction and US Physical Therapy, you can compare the effects of market volatilities on Sterling Construction and US Physical 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 US Physical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Construction and US Physical.
Diversification Opportunities for Sterling Construction and US Physical
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Sterling and UPH is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and US Physical Therapy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Physical Therapy 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 US Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Physical Therapy has no effect on the direction of Sterling Construction i.e., Sterling Construction and US Physical go up and down completely randomly.
Pair Corralation between Sterling Construction and US Physical
Assuming the 90 days horizon Sterling Construction is expected to generate 1.61 times more return on investment than US Physical. However, Sterling Construction is 1.61 times more volatile than US Physical Therapy. It trades about 0.12 of its potential returns per unit of risk. US Physical Therapy is currently generating about 0.01 per unit of risk. If you would invest 2,920 in Sterling Construction on October 11, 2024 and sell it today you would earn a total of 13,080 from holding Sterling Construction or generate 447.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sterling Construction vs. US Physical Therapy
Performance |
| Timeline |
| Sterling Construction |
| US Physical Therapy |
Sterling Construction and US Physical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Construction and US Physical
The main advantage of trading using opposite Sterling Construction and US Physical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Construction position performs unexpectedly, US Physical 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 US Physical will offset losses from the drop in US Physical's long position.| Sterling Construction vs. Keck Seng Investments | Sterling Construction vs. Ultra Clean Holdings | Sterling Construction vs. CVW CLEANTECH INC | Sterling Construction vs. Clean Energy Fuels |
| US Physical vs. NetSol Technologies | US Physical vs. Playtech plc | US Physical vs. Kingdee International Software | US Physical vs. SPORTING |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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