Correlation Between Baird Quality and Sterling Capital

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

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

Diversification Opportunities for Baird Quality and Sterling Capital

0.43

Correlation Coefficient

Baird Quality  Sterling Capital

Very weak diversification

The 3 months correlation between Baird and Sterling is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Baird Quality Intermediate and Sterling Capital Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Mid and Baird Quality 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 Baird Quality Intermediate 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 Mid has no effect on the direction of Baird Quality i.e., Baird Quality and Sterling Capital go up and down completely randomly.

Pair Corralation between Baird Quality and Sterling Capital

Assuming the 90 days horizon Baird Quality is expected to generate 14.14 times less return on investment than Sterling Capital. But when comparing it to its historical volatility, Baird Quality Intermediate is 5.8 times less risky than Sterling Capital. It trades about 0.11 of its potential returns per unit of risk. Sterling Capital Mid is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  1,490  in Sterling Capital Mid on October 24, 2024 and sell it today you would earn a total of  60.00  from holding Sterling Capital Mid or generate 4.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Baird Quality Intermediate  vs.  Sterling Capital Mid

Baird Quality Interm

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Baird Quality Intermediate are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Baird Quality is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sterling Capital Mid

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Baird Quality and Sterling Capital

The main advantage of trading using opposite Baird Quality and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baird Quality 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.

The idea behind Baird Quality Intermediate and Sterling Capital Mid 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 Anywhere module to track or share privately all of your investments from the convenience of any device.