Correlation Between Brockhaus Capital and Sterling Construction

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

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

Diversification Opportunities for Brockhaus Capital and Sterling Construction

-0.79

Correlation Coefficient

Brockhaus Capital  Sterling Construction

Pay attention - limited upside

The 3 months correlation between Brockhaus and Sterling is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Brockhaus Capital Management and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction and Brockhaus 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 Brockhaus Capital Management 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 Brockhaus Capital i.e., Brockhaus Capital and Sterling Construction go up and down completely randomly.

Pair Corralation between Brockhaus Capital and Sterling Construction

Assuming the 90 days trading horizon Brockhaus Capital is expected to generate 12.24 times less return on investment than Sterling Construction. But when comparing it to its historical volatility, Brockhaus Capital Management is 1.09 times less risky than Sterling Construction. It trades about 0.01 of its potential returns per unit of risk. Sterling Construction is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,040  in Sterling Construction on September 28, 2024 and sell it today you would earn a total of  13,655  from holding Sterling Construction or generate 449.18% return on investment over 90 days.

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

Brockhaus Capital Management  vs.  Sterling Construction

Brockhaus Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brockhaus Capital Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Sterling Construction

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Construction are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sterling Construction reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brockhaus Capital and Sterling Construction

The main advantage of trading using opposite Brockhaus Capital and Sterling Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brockhaus Capital 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 Brockhaus Capital Management 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.