Correlation Between Nasdaq and Sterling Capital

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

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

Diversification Opportunities for Nasdaq and Sterling Capital

0.77

Correlation Coefficient

Nasdaq  Sterling Capital

Poor diversification

The 3 months correlation between Nasdaq and Sterling is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Sterling Capital Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Mid and Nasdaq 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 Nasdaq Inc 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 Mid has no effect on the direction of Nasdaq i.e., Nasdaq and Sterling Capital go up and down completely randomly.

Pair Corralation between Nasdaq and Sterling Capital

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the Sterling Capital. In addition to that, Nasdaq is 1.58 times more volatile than Sterling Capital Mid. It trades about -0.03 of its total potential returns per unit of risk. Sterling Capital Mid is currently generating about -0.01 per unit of volatility. If you would invest  1,487  in Sterling Capital Mid on December 28, 2024 and sell it today you would lose (13.00) from holding Sterling Capital Mid or give up 0.87% of portfolio value over 90 days.

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

Nasdaq Inc  vs.  Sterling Capital Mid

Nasdaq Inc

Risk-Adjusted Performance

Weak

Over the last 90 days Nasdaq Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Nasdaq is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Sterling Capital Mid

Risk-Adjusted Performance

Weak

Over the last 90 days Sterling Capital Mid has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Sterling Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nasdaq and Sterling Capital

The main advantage of trading using opposite Nasdaq and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 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 Nasdaq Inc and Sterling Capital Mid 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.