Correlation Between WIMFARM SA and Sterling Construction

Can any of the company-specific risk be diversified away by investing in both WIMFARM SA and Sterling Construction 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 WIMFARM SA and Sterling Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WIMFARM SA EO and Sterling Construction, you can compare the effects of market volatilities on WIMFARM SA and Sterling Construction 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 WIMFARM SA with a short position of Sterling Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of WIMFARM SA and Sterling Construction.

Diversification Opportunities for WIMFARM SA and Sterling Construction

-0.71

Correlation Coefficient

WIMFARM SA  Sterling Construction

Pay attention - limited upside

The 3 months correlation between WIMFARM and Sterling is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding WIMFARM SA EO and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction and WIMFARM SA 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 WIMFARM SA EO are associated (or correlated) with Sterling Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Construction has no effect on the direction of WIMFARM SA i.e., WIMFARM SA and Sterling Construction go up and down completely randomly.

Pair Corralation between WIMFARM SA and Sterling Construction

Assuming the 90 days horizon WIMFARM SA EO is expected to under-perform the Sterling Construction. In addition to that, WIMFARM SA is 1.14 times more volatile than Sterling Construction. It trades about -0.06 of its total potential returns per unit of risk. Sterling Construction is currently generating about 0.13 per unit of volatility. If you would invest  3,000  in Sterling Construction on September 20, 2024 and sell it today you would earn a total of  13,810  from holding Sterling Construction or generate 460.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

WIMFARM SA EO  vs.  Sterling Construction

WIMFARM SA EO

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WIMFARM SA EO are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WIMFARM SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sterling Construction

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Construction are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Sterling Construction reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WIMFARM SA and Sterling Construction

The main advantage of trading using opposite WIMFARM SA and Sterling Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WIMFARM SA position performs unexpectedly, Sterling Construction 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 Construction will offset losses from the drop in Sterling Construction's long position.

The idea behind WIMFARM SA EO and Sterling Construction pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.