Correlation Between Extended Market and Sterling Capital
Can any of the company-specific risk be diversified away by investing in both Extended Market 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 Extended Market and Sterling Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Extended Market Index and Sterling Capital Stratton, you can compare the effects of market volatilities on Extended Market 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 Extended Market with a short position of Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extended Market and Sterling Capital.
Diversification Opportunities for Extended Market and Sterling Capital
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Extended and Sterling is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Extended Market Index and Sterling Capital Stratton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Stratton and Extended Market 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 Extended Market Index 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 Stratton has no effect on the direction of Extended Market i.e., Extended Market and Sterling Capital go up and down completely randomly.
Pair Corralation between Extended Market and Sterling Capital
Assuming the 90 days horizon Extended Market is expected to generate 1.03 times less return on investment than Sterling Capital. But when comparing it to its historical volatility, Extended Market Index is 1.09 times less risky than Sterling Capital. It trades about 0.19 of its potential returns per unit of risk. Sterling Capital Stratton is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 3,890 in Sterling Capital Stratton on November 3, 2024 and sell it today you would earn a total of 139.00 from holding Sterling Capital Stratton or generate 3.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extended Market Index vs. Sterling Capital Stratton
Performance |
| Timeline |
| Extended Market Index |
| Sterling Capital Stratton |
Extended Market and Sterling Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extended Market and Sterling Capital
The main advantage of trading using opposite Extended Market and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extended Market 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.| Extended Market vs. Lebenthal Lisanti Small | Extended Market vs. Oklahoma College Savings | Extended Market vs. Small Pany Growth | Extended Market vs. Sp Smallcap 600 |
| Sterling Capital vs. Fxybjx | Sterling Capital vs. Fwnhtx | Sterling Capital vs. Fznopx | Sterling Capital vs. Wmcanx |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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