Correlation Between Sterling Capital and Perritt Ultra

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

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

Diversification Opportunities for Sterling Capital and Perritt Ultra

0.42

Correlation Coefficient

Sterling Capital  Perritt Ultra

Very weak diversification

The 3 months correlation between Sterling and PERRITT is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Capital Stratton and Perritt Ultra Microcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perritt Ultra Microcap and Sterling Capital 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 Capital Stratton are associated (or correlated) with Perritt Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perritt Ultra Microcap has no effect on the direction of Sterling Capital i.e., Sterling Capital and Perritt Ultra go up and down completely randomly.

Pair Corralation between Sterling Capital and Perritt Ultra

Assuming the 90 days horizon Sterling Capital Stratton is expected to generate 1.24 times more return on investment than Perritt Ultra. However, Sterling Capital is 1.24 times more volatile than Perritt Ultra Microcap. It trades about 0.17 of its potential returns per unit of risk. Perritt Ultra Microcap is currently generating about 0.08 per unit of risk. If you would invest  4,669  in Sterling Capital Stratton on September 2, 2024 and sell it today you would earn a total of  591.00  from holding Sterling Capital Stratton or generate 12.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	62.5%
Values	Daily Returns

Sterling Capital Stratton  vs.  Perritt Ultra Microcap

Sterling Capital Stratton

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Capital Stratton are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Sterling Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Perritt Ultra Microcap

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Perritt Ultra Microcap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Perritt Ultra is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sterling Capital and Perritt Ultra

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

The idea behind Sterling Capital Stratton and Perritt Ultra Microcap 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.