Correlation Between Sterling Capital and Wilmington Diversified
Can any of the company-specific risk be diversified away by investing in both Sterling Capital and Wilmington Diversified 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 Wilmington Diversified into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Capital Special and Wilmington Diversified Income, you can compare the effects of market volatilities on Sterling Capital and Wilmington Diversified 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 Wilmington Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Capital and Wilmington Diversified.
Diversification Opportunities for Sterling Capital and Wilmington Diversified
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sterling and Wilmington is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Capital Special and Wilmington Diversified Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilmington Diversified 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 Special are associated (or correlated) with Wilmington Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilmington Diversified has no effect on the direction of Sterling Capital i.e., Sterling Capital and Wilmington Diversified go up and down completely randomly.
Pair Corralation between Sterling Capital and Wilmington Diversified
Assuming the 90 days horizon Sterling Capital Special is expected to under-perform the Wilmington Diversified. In addition to that, Sterling Capital is 3.92 times more volatile than Wilmington Diversified Income. It trades about -0.09 of its total potential returns per unit of risk. Wilmington Diversified Income is currently generating about -0.08 per unit of volatility. If you would invest 1,385 in Wilmington Diversified Income on October 9, 2024 and sell it today you would lose (56.00) from holding Wilmington Diversified Income or give up 4.04% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Sterling Capital Special vs. Wilmington Diversified Income
Performance |
Timeline |
Sterling Capital Special |
Wilmington Diversified |
Sterling Capital and Wilmington Diversified Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Sterling Capital and Wilmington Diversified
The main advantage of trading using opposite Sterling Capital and Wilmington Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Capital position performs unexpectedly, Wilmington Diversified 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 Wilmington Diversified will offset losses from the drop in Wilmington Diversified's long position.Sterling Capital vs. Sterling Capital Equity | Sterling Capital vs. Sterling Capital Behavioral | Sterling Capital vs. Sterling Capital Behavioral | Sterling Capital vs. Sterling Capital Behavioral |
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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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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