Correlation Between Sterling Capital and Stralem Equity

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

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

Diversification Opportunities for Sterling Capital and Stralem Equity

0.08

Correlation Coefficient

Sterling Capital  Stralem Equity

Significant diversification

The 3 months correlation between Sterling and Stralem is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Capital Equity and Stralem Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stralem Equity and Sterling Capital 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 Capital Equity are associated (or correlated) with Stralem Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stralem Equity has no effect on the direction of Sterling Capital i.e., Sterling Capital and Stralem Equity go up and down completely randomly.

Pair Corralation between Sterling Capital and Stralem Equity

Assuming the 90 days horizon Sterling Capital Equity is expected to under-perform the Stralem Equity. But the mutual fund apears to be less risky and, when comparing its historical volatility, Sterling Capital Equity is 1.16 times less risky than Stralem Equity. The mutual fund trades about -0.21 of its potential returns per unit of risk. The Stralem Equity Fund is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  3,185  in Stralem Equity Fund on December 5, 2024 and sell it today you would lose (70.00) from holding Stralem Equity Fund or give up 2.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Sterling Capital Equity  vs.  Stralem Equity Fund

Sterling Capital Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sterling Capital Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Stralem Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stralem Equity Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Stralem Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sterling Capital and Stralem Equity

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

The idea behind Sterling Capital Equity and Stralem Equity Fund 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.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.