Correlation Between Sterling Capital and First Trust
Can any of the company-specific risk be diversified away by investing in both Sterling Capital and First Trust 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 First Trust 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 First Trust Value, you can compare the effects of market volatilities on Sterling Capital and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Capital and First Trust.
Diversification Opportunities for Sterling Capital and First Trust
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Sterling and First is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Capital Focus and First Trust Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Value 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Value has no effect on the direction of Sterling Capital i.e., Sterling Capital and First Trust go up and down completely randomly.
Pair Corralation between Sterling Capital and First Trust
Considering the 90-day investment horizon Sterling Capital Focus is expected to generate 2.02 times more return on investment than First Trust. However, Sterling Capital is 2.02 times more volatile than First Trust Value. It trades about -0.1 of its potential returns per unit of risk. First Trust Value is currently generating about -0.49 per unit of risk. If you would invest 3,109 in Sterling Capital Focus on September 25, 2024 and sell it today you would lose (84.00) from holding Sterling Capital Focus or give up 2.7% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 95.24% |
Values | Daily Returns |
Sterling Capital Focus vs. First Trust Value
Performance |
Timeline |
Sterling Capital Focus |
First Trust Value |
Sterling Capital and First Trust Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Sterling Capital and First Trust
The main advantage of trading using opposite Sterling Capital and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Capital position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.Sterling Capital vs. Absolute Core Strategy | Sterling Capital vs. iShares ESG Advanced | Sterling Capital vs. PIMCO RAFI Dynamic | Sterling Capital vs. HCM Defender 100 |
First Trust vs. First Trust Morningstar | First Trust vs. First Trust Rising | First Trust vs. First Trust Capital | First Trust vs. WisdomTree LargeCap Dividend |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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