Correlation Between IShares Expanded and Sterling Capital

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

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

Diversification Opportunities for IShares Expanded and Sterling Capital

0.92

Correlation Coefficient

IShares Expanded  Sterling Capital

Almost no diversification

The 3 months correlation between IShares and Sterling is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding iShares Expanded Tech Software and Sterling Capital Focus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Focus and IShares Expanded 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 iShares Expanded Tech Software 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 Focus has no effect on the direction of IShares Expanded i.e., IShares Expanded and Sterling Capital go up and down completely randomly.

Pair Corralation between IShares Expanded and Sterling Capital

Considering the 90-day investment horizon iShares Expanded Tech Software is expected to under-perform the Sterling Capital. In addition to that, IShares Expanded is 1.24 times more volatile than Sterling Capital Focus. It trades about -0.1 of its total potential returns per unit of risk. Sterling Capital Focus is currently generating about -0.07 per unit of volatility. If you would invest  2,989  in Sterling Capital Focus on December 30, 2024 and sell it today you would lose (189.00) from holding Sterling Capital Focus or give up 6.32% of portfolio value over 90 days.

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

iShares Expanded Tech Software  vs.  Sterling Capital Focus

iShares Expanded Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Expanded Tech Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Etf's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Sterling Capital Focus

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sterling Capital Focus has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Sterling Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares Expanded and Sterling Capital

The main advantage of trading using opposite IShares Expanded and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Expanded 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 iShares Expanded Tech Software and Sterling Capital Focus 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.