Correlation Between STERLING FINANCIAL and DEAP CAPITAL

Can any of the company-specific risk be diversified away by investing in both STERLING FINANCIAL and DEAP 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 STERLING FINANCIAL and DEAP CAPITAL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between STERLING FINANCIAL HOLDINGS and DEAP CAPITAL MANAGEMENT, you can compare the effects of market volatilities on STERLING FINANCIAL and DEAP 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 STERLING FINANCIAL with a short position of DEAP CAPITAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of STERLING FINANCIAL and DEAP CAPITAL.

Diversification Opportunities for STERLING FINANCIAL and DEAP CAPITAL

0.13

Correlation Coefficient

STERLING FINANCIAL  DEAP CAPITAL

Average diversification

The 3 months correlation between STERLING and DEAP is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding STERLING FINANCIAL HOLDINGS and DEAP CAPITAL MANAGEMENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DEAP CAPITAL MANAGEMENT and STERLING FINANCIAL 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 FINANCIAL HOLDINGS are associated (or correlated) with DEAP CAPITAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DEAP CAPITAL MANAGEMENT has no effect on the direction of STERLING FINANCIAL i.e., STERLING FINANCIAL and DEAP CAPITAL go up and down completely randomly.

Pair Corralation between STERLING FINANCIAL and DEAP CAPITAL

Assuming the 90 days trading horizon STERLING FINANCIAL HOLDINGS is expected to generate 0.79 times more return on investment than DEAP CAPITAL. However, STERLING FINANCIAL HOLDINGS is 1.26 times less risky than DEAP CAPITAL. It trades about 0.09 of its potential returns per unit of risk. DEAP CAPITAL MANAGEMENT is currently generating about -0.06 per unit of risk. If you would invest  480.00  in STERLING FINANCIAL HOLDINGS on October 25, 2024 and sell it today you would earn a total of  75.00  from holding STERLING FINANCIAL HOLDINGS or generate 15.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

STERLING FINANCIAL HOLDINGS  vs.  DEAP CAPITAL MANAGEMENT

STERLING FINANCIAL

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in STERLING FINANCIAL HOLDINGS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, STERLING FINANCIAL displayed solid returns over the last few months and may actually be approaching a breakup point.

DEAP CAPITAL MANAGEMENT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DEAP CAPITAL MANAGEMENT has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with STERLING FINANCIAL and DEAP CAPITAL

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

The idea behind STERLING FINANCIAL HOLDINGS and DEAP CAPITAL MANAGEMENT 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.