Correlation Between Sterling Construction and ENN Energy
Can any of the company-specific risk be diversified away by investing in both Sterling Construction and ENN 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 ENN 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 ENN Energy Holdings, you can compare the effects of market volatilities on Sterling Construction and ENN 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 ENN Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Construction and ENN Energy.
Diversification Opportunities for Sterling Construction and ENN Energy
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sterling and ENN is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and ENN Energy Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENN Energy Holdings 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 ENN Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENN Energy Holdings has no effect on the direction of Sterling Construction i.e., Sterling Construction and ENN Energy go up and down completely randomly.
Pair Corralation between Sterling Construction and ENN Energy
Assuming the 90 days horizon Sterling Construction is expected to generate 1.01 times more return on investment than ENN Energy. However, Sterling Construction is 1.01 times more volatile than ENN Energy Holdings. It trades about 0.24 of its potential returns per unit of risk. ENN Energy Holdings is currently generating about 0.21 per unit of risk. If you would invest 10,530 in Sterling Construction on September 12, 2024 and sell it today you would earn a total of 6,825 from holding Sterling Construction or generate 64.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.46% |
| Values | Daily Returns |
Sterling Construction vs. ENN Energy Holdings
Performance |
| Timeline |
| Sterling Construction |
| ENN Energy Holdings |
Sterling Construction and ENN Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Construction and ENN Energy
The main advantage of trading using opposite Sterling Construction and ENN Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Construction position performs unexpectedly, ENN 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 ENN Energy will offset losses from the drop in ENN Energy's long position.| Sterling Construction vs. Superior Plus Corp | Sterling Construction vs. SIVERS SEMICONDUCTORS AB | Sterling Construction vs. Norsk Hydro ASA | Sterling Construction vs. Reliance Steel Aluminum |
| ENN Energy vs. COLUMBIA SPORTSWEAR | ENN Energy vs. InPlay Oil Corp | ENN Energy vs. Universal Display | ENN Energy vs. JD SPORTS FASH |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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