Correlation Between Adams Natural and Sterling Capital

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

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

Diversification Opportunities for Adams Natural and Sterling Capital

0.6

Correlation Coefficient

Adams Natural  Sterling Capital

Poor diversification

The 3 months correlation between Adams and Sterling is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Adams Natural Resources 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 Adams Natural 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 Adams Natural Resources 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 Adams Natural i.e., Adams Natural and Sterling Capital go up and down completely randomly.

Pair Corralation between Adams Natural and Sterling Capital

Considering the 90-day investment horizon Adams Natural Resources is expected to generate 0.67 times more return on investment than Sterling Capital. However, Adams Natural Resources is 1.48 times less risky than Sterling Capital. It trades about 0.04 of its potential returns per unit of risk. Sterling Capital Mid is currently generating about -0.06 per unit of risk. If you would invest  2,154  in Adams Natural Resources on September 16, 2024 and sell it today you would earn a total of  54.00  from holding Adams Natural Resources or generate 2.51% return on investment over 90 days.

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

Adams Natural Resources  vs.  Sterling Capital Mid

Adams Natural Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Adams Natural Resources are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy technical and fundamental indicators, Adams Natural is not utilizing all of its potentials. The current stock price disarray, 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 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 Adams Natural and Sterling Capital

The main advantage of trading using opposite Adams Natural and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adams Natural 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 Adams Natural Resources 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.

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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.