Correlation Between Dairy Farm and Sterling Construction
Can any of the company-specific risk be diversified away by investing in both Dairy Farm 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 Dairy Farm and Sterling Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dairy Farm International and Sterling Construction, you can compare the effects of market volatilities on Dairy Farm 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 Dairy Farm with a short position of Sterling Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dairy Farm and Sterling Construction.
Diversification Opportunities for Dairy Farm and Sterling Construction
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dairy and Sterling is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction and Dairy Farm 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 Dairy Farm International 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 Dairy Farm i.e., Dairy Farm and Sterling Construction go up and down completely randomly.
Pair Corralation between Dairy Farm and Sterling Construction
Assuming the 90 days trading horizon Dairy Farm International is expected to generate 0.42 times more return on investment than Sterling Construction. However, Dairy Farm International is 2.39 times less risky than Sterling Construction. It trades about -0.09 of its potential returns per unit of risk. Sterling Construction is currently generating about -0.12 per unit of risk. If you would invest 236.00 in Dairy Farm International on December 3, 2024 and sell it today you would lose (28.00) from holding Dairy Farm International or give up 11.86% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Dairy Farm International vs. Sterling Construction
Performance |
Timeline |
Dairy Farm International |
Sterling Construction |
Dairy Farm and Sterling Construction Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Dairy Farm and Sterling Construction
The main advantage of trading using opposite Dairy Farm and Sterling Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dairy Farm 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.Dairy Farm vs. SIEM OFFSHORE NEW | Dairy Farm vs. Broadcom | Dairy Farm vs. BROADSTNET LEADL 00025 | Dairy Farm vs. BROADPEAK SA EO |
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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