Correlation Between Stralem Equity and Sterling Capital

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

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

Diversification Opportunities for Stralem Equity and Sterling Capital

0.86

Correlation Coefficient

Stralem Equity  Sterling Capital

Very poor diversification

The 3 months correlation between Stralem and Sterling is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Stralem Equity Fund 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 Stralem Equity 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 Stralem Equity Fund 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 Stralem Equity i.e., Stralem Equity and Sterling Capital go up and down completely randomly.

Pair Corralation between Stralem Equity and Sterling Capital

Assuming the 90 days horizon Stralem Equity Fund is expected to generate 0.3 times more return on investment than Sterling Capital. However, Stralem Equity Fund is 3.33 times less risky than Sterling Capital. It trades about -0.1 of its potential returns per unit of risk. Sterling Capital Behavioral is currently generating about -0.17 per unit of risk. If you would invest  3,148  in Stralem Equity Fund on September 16, 2024 and sell it today you would lose (37.00) from holding Stralem Equity Fund or give up 1.18% of portfolio value over 90 days.

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

Stralem Equity Fund  vs.  Sterling Capital Behavioral

Stralem Equity

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stralem Equity Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Stralem Equity 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 fundamental drivers, 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 Stralem Equity and Sterling Capital

The main advantage of trading using opposite Stralem Equity and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stralem Equity 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 Stralem Equity Fund 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.