Correlation Between Sterling Capital and SPDR Dow

Can any of the company-specific risk be diversified away by investing in both Sterling Capital and SPDR Dow 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 SPDR Dow 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 SPDR Dow Jones, you can compare the effects of market volatilities on Sterling Capital and SPDR Dow 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 SPDR Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Capital and SPDR Dow.

Diversification Opportunities for Sterling Capital and SPDR Dow

0.94

Correlation Coefficient

Sterling Capital  SPDR Dow

Almost no diversification

The 3 months correlation between Sterling and SPDR is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Capital Focus and SPDR Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Dow Jones 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 SPDR Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Dow Jones has no effect on the direction of Sterling Capital i.e., Sterling Capital and SPDR Dow go up and down completely randomly.

Pair Corralation between Sterling Capital and SPDR Dow

Considering the 90-day investment horizon Sterling Capital Focus is expected to under-perform the SPDR Dow. In addition to that, Sterling Capital is 1.65 times more volatile than SPDR Dow Jones. It trades about -0.06 of its total potential returns per unit of risk. SPDR Dow Jones is currently generating about -0.05 per unit of volatility. If you would invest  43,087  in SPDR Dow Jones on December 24, 2024 and sell it today you would lose (1,125) from holding SPDR Dow Jones or give up 2.61% of portfolio value over 90 days.

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

Sterling Capital Focus  vs.  SPDR Dow Jones

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.

SPDR Dow Jones

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Dow Jones has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, SPDR Dow is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sterling Capital and SPDR Dow

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

The idea behind Sterling Capital Focus and SPDR Dow Jones 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.