Correlation Between Tax-managed and Sterling Capital

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

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

Diversification Opportunities for Tax-managed and Sterling Capital

0.95

Correlation Coefficient

Tax-managed  Sterling Capital

Almost no diversification

The 3 months correlation between Tax-managed and Sterling is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Tax Managed Mid Small and Sterling Capital Behavioral in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Beh and Tax-managed 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 Tax Managed Mid Small 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 Beh has no effect on the direction of Tax-managed i.e., Tax-managed and Sterling Capital go up and down completely randomly.

Pair Corralation between Tax-managed and Sterling Capital

Assuming the 90 days horizon Tax Managed Mid Small is expected to under-perform the Sterling Capital. In addition to that, Tax-managed is 1.44 times more volatile than Sterling Capital Behavioral. It trades about -0.27 of its total potential returns per unit of risk. Sterling Capital Behavioral is currently generating about -0.21 per unit of volatility. If you would invest  3,146  in Sterling Capital Behavioral on October 9, 2024 and sell it today you would lose (110.00) from holding Sterling Capital Behavioral or give up 3.5% of portfolio value over 90 days.

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

Tax Managed Mid Small  vs.  Sterling Capital Behavioral

Tax Managed Mid

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sterling Capital Beh

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sterling Capital Behavioral 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.

Pair Trading with Tax-managed and Sterling Capital

The main advantage of trading using opposite Tax-managed and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tax-managed 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 Tax Managed Mid Small and Sterling Capital Behavioral 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.