Correlation Between Sterling Capital and 6 Meridian

Can any of the company-specific risk be diversified away by investing in both Sterling Capital and 6 Meridian 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 6 Meridian 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 6 Meridian Quality, you can compare the effects of market volatilities on Sterling Capital and 6 Meridian 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 6 Meridian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Capital and 6 Meridian.

Diversification Opportunities for Sterling Capital and 6 Meridian

0.93

Correlation Coefficient

Sterling Capital  6 Meridian

Almost no diversification

The 3 months correlation between Sterling and SXQG is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Capital Focus and 6 Meridian Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 6 Meridian Quality 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 6 Meridian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 6 Meridian Quality has no effect on the direction of Sterling Capital i.e., Sterling Capital and 6 Meridian go up and down completely randomly.

Pair Corralation between Sterling Capital and 6 Meridian

Considering the 90-day investment horizon Sterling Capital Focus is expected to generate 1.35 times more return on investment than 6 Meridian. However, Sterling Capital is 1.35 times more volatile than 6 Meridian Quality. It trades about 0.14 of its potential returns per unit of risk. 6 Meridian Quality is currently generating about 0.14 per unit of risk. If you would invest  2,830  in Sterling Capital Focus on August 30, 2024 and sell it today you would earn a total of  287.00  from holding Sterling Capital Focus or generate 10.14% return on investment over 90 days.

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

Sterling Capital Focus  vs.  6 Meridian Quality

Sterling Capital Focus

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Capital Focus are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting fundamental indicators, Sterling Capital may actually be approaching a critical reversion point that can send shares even higher in December 2024.

6 Meridian Quality

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in 6 Meridian Quality are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, 6 Meridian may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Sterling Capital and 6 Meridian

The main advantage of trading using opposite Sterling Capital and 6 Meridian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Capital position performs unexpectedly, 6 Meridian 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 6 Meridian will offset losses from the drop in 6 Meridian's long position.

The idea behind Sterling Capital Focus and 6 Meridian Quality 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.