Correlation Between Sterling Capital and Moderately Aggressive

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

By analyzing existing cross correlation between Sterling Capital Mid and Moderately Aggressive Balanced, you can compare the effects of market volatilities on Sterling Capital and Moderately Aggressive 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 Moderately Aggressive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Capital and Moderately Aggressive.

Diversification Opportunities for Sterling Capital and Moderately Aggressive

0.9

Correlation Coefficient

Sterling Capital  Moderately Aggressive

Almost no diversification

The 3 months correlation between Sterling and Moderately is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Capital Mid and Moderately Aggressive Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderately Aggressive 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 Mid are associated (or correlated) with Moderately Aggressive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderately Aggressive has no effect on the direction of Sterling Capital i.e., Sterling Capital and Moderately Aggressive go up and down completely randomly.

Pair Corralation between Sterling Capital and Moderately Aggressive

Assuming the 90 days horizon Sterling Capital Mid is expected to generate 1.31 times more return on investment than Moderately Aggressive. However, Sterling Capital is 1.31 times more volatile than Moderately Aggressive Balanced. It trades about -0.02 of its potential returns per unit of risk. Moderately Aggressive Balanced is currently generating about -0.05 per unit of risk. If you would invest  1,433  in Sterling Capital Mid on December 23, 2024 and sell it today you would lose (19.00) from holding Sterling Capital Mid or give up 1.33% 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 Mid  vs.  Moderately Aggressive Balanced

Sterling Capital Mid

Risk-Adjusted Performance

Very 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 basic indicators, Sterling Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Moderately Aggressive

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Sterling Capital and Moderately Aggressive

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

The idea behind Sterling Capital Mid and Moderately Aggressive Balanced 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.