Correlation Between Government Securities and Sterling Capital
Can any of the company-specific risk be diversified away by investing in both Government Securities and Sterling Capital 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 Government Securities and Sterling Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Government Securities Fund and Sterling Capital Behavioral, you can compare the effects of market volatilities on Government Securities and Sterling Capital 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 Government Securities with a short position of Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Government Securities and Sterling Capital.
Diversification Opportunities for Government Securities and Sterling Capital
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Government and Sterling is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Government Securities Fund and Sterling Capital Behavioral in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Beh and Government Securities 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 Government Securities Fund are associated (or correlated) with Sterling Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Capital Beh has no effect on the direction of Government Securities i.e., Government Securities and Sterling Capital go up and down completely randomly.
Pair Corralation between Government Securities and Sterling Capital
Assuming the 90 days horizon Government Securities is expected to generate 3.99 times less return on investment than Sterling Capital. But when comparing it to its historical volatility, Government Securities Fund is 2.23 times less risky than Sterling Capital. It trades about 0.04 of its potential returns per unit of risk. Sterling Capital Behavioral is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 796.00 in Sterling Capital Behavioral on September 3, 2024 and sell it today you would earn a total of 219.00 from holding Sterling Capital Behavioral or generate 27.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Government Securities Fund vs. Sterling Capital Behavioral
Performance |
| Timeline |
| Government Securities |
| Sterling Capital Beh |
Government Securities and Sterling Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Government Securities and Sterling Capital
The main advantage of trading using opposite Government Securities and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Government Securities position performs unexpectedly, Sterling Capital 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 Sterling Capital will offset losses from the drop in Sterling Capital's long position.| Government Securities vs. T Rowe Price | Government Securities vs. T Rowe Price | Government Securities vs. T Rowe Price | Government Securities vs. T Rowe Price |
| Sterling Capital vs. Oakmark International Fund | Sterling Capital vs. Dodge International Stock | Sterling Capital vs. Oakmark International Fund | Sterling Capital vs. Oakmark International Fund |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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