Correlation Between Nasdaq-100(r) and Sterling Capital

Can any of the company-specific risk be diversified away by investing in both Nasdaq-100(r) 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-100(r) 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 100 2x Strategy and Sterling Capital Short, you can compare the effects of market volatilities on Nasdaq-100(r) 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-100(r) with a short position of Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100(r) and Sterling Capital.

Diversification Opportunities for Nasdaq-100(r) and Sterling Capital

0.52

Correlation Coefficient

Nasdaq-100(r)  Sterling Capital

Very weak diversification

The 3 months correlation between Nasdaq-100(r) and Sterling is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Sterling Capital Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Short and Nasdaq-100(r) 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 100 2x Strategy 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 Short has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and Sterling Capital go up and down completely randomly.

Pair Corralation between Nasdaq-100(r) and Sterling Capital

Assuming the 90 days horizon Nasdaq-100(r) is expected to generate 19.36 times less return on investment than Sterling Capital. In addition to that, Nasdaq-100(r) is 21.02 times more volatile than Sterling Capital Short. It trades about 0.0 of its total potential returns per unit of risk. Sterling Capital Short is currently generating about 0.16 per unit of volatility. If you would invest  812.00  in Sterling Capital Short on October 7, 2024 and sell it today you would earn a total of  22.00  from holding Sterling Capital Short or generate 2.71% return on investment over 90 days.

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

Nasdaq 100 2x Strategy  vs.  Sterling Capital Short

Nasdaq 100 2x

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 2x Strategy are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Nasdaq-100(r) may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Sterling Capital Short

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Capital Short are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental 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-100(r) and Sterling Capital

The main advantage of trading using opposite Nasdaq-100(r) and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100(r) 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 100 2x Strategy and Sterling Capital Short 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.