Correlation Between Sterling Capital and IShares Core

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

By analyzing existing cross correlation between Sterling Capital Focus and iShares Core Dividend, you can compare the effects of market volatilities on Sterling Capital and IShares Core 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 IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Capital and IShares Core.

Diversification Opportunities for Sterling Capital and IShares Core

0.51

Correlation Coefficient

Sterling Capital  IShares Core

Very weak diversification

The 3 months correlation between Sterling and IShares is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Capital Focus and iShares Core Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Dividend 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 Focus are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core Dividend has no effect on the direction of Sterling Capital i.e., Sterling Capital and IShares Core go up and down completely randomly.

Pair Corralation between Sterling Capital and IShares Core

Considering the 90-day investment horizon Sterling Capital Focus is expected to generate 1.91 times more return on investment than IShares Core. However, Sterling Capital is 1.91 times more volatile than iShares Core Dividend. It trades about 0.05 of its potential returns per unit of risk. iShares Core Dividend is currently generating about 0.09 per unit of risk. If you would invest  2,765  in Sterling Capital Focus on October 2, 2024 and sell it today you would earn a total of  224.00  from holding Sterling Capital Focus or generate 8.1% return on investment over 90 days.

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

Sterling Capital Focus  vs.  iShares Core Dividend

Sterling Capital Focus

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Capital Focus are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

iShares Core Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares Core is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sterling Capital and IShares Core

The main advantage of trading using opposite Sterling Capital and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Capital position performs unexpectedly, IShares Core 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 IShares Core will offset losses from the drop in IShares Core's long position.

The idea behind Sterling Capital Focus and iShares Core Dividend 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.