Correlation Between Sterling Construction and Ming Shing

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

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

Diversification Opportunities for Sterling Construction and Ming Shing

0.65

Correlation Coefficient

Sterling Construction  Ming Shing

Poor diversification

The 3 months correlation between Sterling and Ming is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and Ming Shing Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ming Shing Group and Sterling Construction 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 Construction are associated (or correlated) with Ming Shing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ming Shing Group has no effect on the direction of Sterling Construction i.e., Sterling Construction and Ming Shing go up and down completely randomly.

Pair Corralation between Sterling Construction and Ming Shing

Given the investment horizon of 90 days Sterling Construction is expected to generate 0.31 times more return on investment than Ming Shing. However, Sterling Construction is 3.19 times less risky than Ming Shing. It trades about -0.21 of its potential returns per unit of risk. Ming Shing Group is currently generating about -0.25 per unit of risk. If you would invest  19,633  in Sterling Construction on September 24, 2024 and sell it today you would lose (2,113) from holding Sterling Construction or give up 10.76% of portfolio value over 90 days.

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

Sterling Construction  vs.  Ming Shing Group

Sterling Construction

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Construction are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Sterling Construction disclosed solid returns over the last few months and may actually be approaching a breakup point.

Ming Shing Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ming Shing Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Sterling Construction and Ming Shing

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

The idea behind Sterling Construction and Ming Shing Group 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.