Correlation Between Huber Capital and Sterling Capital

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

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

Diversification Opportunities for Huber Capital and Sterling Capital

0.9

Correlation Coefficient

Huber Capital  Sterling Capital

Almost no diversification

The 3 months correlation between Huber and Sterling is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Huber Capital Diversified and Sterling Capital Stratton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Stratton and Huber 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 Huber Capital Diversified 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 Stratton has no effect on the direction of Huber Capital i.e., Huber Capital and Sterling Capital go up and down completely randomly.

Pair Corralation between Huber Capital and Sterling Capital

Assuming the 90 days horizon Huber Capital Diversified is expected to generate 0.98 times more return on investment than Sterling Capital. However, Huber Capital Diversified is 1.02 times less risky than Sterling Capital. It trades about -0.04 of its potential returns per unit of risk. Sterling Capital Stratton is currently generating about -0.04 per unit of risk. If you would invest  2,404  in Huber Capital Diversified on December 21, 2024 and sell it today you would lose (57.00) from holding Huber Capital Diversified or give up 2.37% of portfolio value over 90 days.

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

Huber Capital Diversified  vs.  Sterling Capital Stratton

Huber Capital Diversified

Risk-Adjusted Performance

Very Weak

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

Sterling Capital Stratton

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sterling Capital Stratton has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential 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 Huber Capital and Sterling Capital

The main advantage of trading using opposite Huber Capital and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huber Capital 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 Huber Capital Diversified and Sterling Capital Stratton 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.