Correlation Between Pace International and Sterling Capital

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

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

Diversification Opportunities for Pace International and Sterling Capital

-0.26

Correlation Coefficient

Pace International  Sterling Capital

Very good diversification

The 3 months correlation between Pace and Sterling is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Pace International Emerging 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 Pace International 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 Pace International Emerging 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 Pace International i.e., Pace International and Sterling Capital go up and down completely randomly.

Pair Corralation between Pace International and Sterling Capital

Assuming the 90 days horizon Pace International Emerging is expected to generate 0.73 times more return on investment than Sterling Capital. However, Pace International Emerging is 1.38 times less risky than Sterling Capital. It trades about 0.02 of its potential returns per unit of risk. Sterling Capital Mid is currently generating about -0.07 per unit of risk. If you would invest  1,313  in Pace International Emerging on September 18, 2024 and sell it today you would earn a total of  15.00  from holding Pace International Emerging or generate 1.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Pace International Emerging  vs.  Sterling Capital Mid

Pace International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pace International Emerging are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Pace International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sterling Capital Mid

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Fund's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Pace International and Sterling Capital

The main advantage of trading using opposite Pace International and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace International 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 Pace International Emerging 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.