Correlation Between Sterling Check and CSG Systems

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

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

Diversification Opportunities for Sterling Check and CSG Systems

0.7

Correlation Coefficient

Sterling Check  CSG Systems

Poor diversification

The 3 months correlation between Sterling and CSG is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Check Corp and CSG Systems International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSG Systems International and Sterling Check 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 Check Corp are associated (or correlated) with CSG Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSG Systems International has no effect on the direction of Sterling Check i.e., Sterling Check and CSG Systems go up and down completely randomly.

Pair Corralation between Sterling Check and CSG Systems

Given the investment horizon of 90 days Sterling Check is expected to generate 2.92 times less return on investment than CSG Systems. But when comparing it to its historical volatility, Sterling Check Corp is 1.62 times less risky than CSG Systems. It trades about 0.08 of its potential returns per unit of risk. CSG Systems International is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,758  in CSG Systems International on September 1, 2024 and sell it today you would earn a total of  723.00  from holding CSG Systems International or generate 15.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	68.25%
Values	Daily Returns

Sterling Check Corp  vs.  CSG Systems International

Sterling Check Corp

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Sterling Check Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Sterling Check is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

CSG Systems International

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CSG Systems International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, CSG Systems unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sterling Check and CSG Systems

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

The idea behind Sterling Check Corp and CSG Systems International 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.