Correlation Between Sterling Capital and American Beacon

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

By analyzing existing cross correlation between Sterling Capital Short and American Beacon The, you can compare the effects of market volatilities on Sterling Capital and American Beacon 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 American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Capital and American Beacon.

Diversification Opportunities for Sterling Capital and American Beacon

0.49

Correlation Coefficient

Sterling Capital  American Beacon

Very weak diversification

The 3 months correlation between Sterling and American is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Capital Short and American Beacon The in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon 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 Short are associated (or correlated) with American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon has no effect on the direction of Sterling Capital i.e., Sterling Capital and American Beacon go up and down completely randomly.

Pair Corralation between Sterling Capital and American Beacon

Assuming the 90 days horizon Sterling Capital is expected to generate 3.4 times less return on investment than American Beacon. But when comparing it to its historical volatility, Sterling Capital Short is 7.58 times less risky than American Beacon. It trades about 0.16 of its potential returns per unit of risk. American Beacon The is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,053  in American Beacon The on December 31, 2024 and sell it today you would earn a total of  65.00  from holding American Beacon The or generate 3.17% return on investment over 90 days.

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

Sterling Capital Short  vs.  American Beacon The

Sterling Capital Short

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Capital Short are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Sterling Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Beacon

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon The are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, American Beacon 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 American Beacon

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

The idea behind Sterling Capital Short and American Beacon The 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.