Correlation Between Sterling and Waaree Energies

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

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

Diversification Opportunities for Sterling and Waaree Energies

0.91

Correlation Coefficient

Sterling  Waaree Energies

Almost no diversification

The 3 months correlation between Sterling and Waaree is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Sterling and Wilson and Waaree Energies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waaree Energies and Sterling 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 and Wilson are associated (or correlated) with Waaree Energies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waaree Energies has no effect on the direction of Sterling i.e., Sterling and Waaree Energies go up and down completely randomly.

Pair Corralation between Sterling and Waaree Energies

Assuming the 90 days trading horizon Sterling and Wilson is expected to under-perform the Waaree Energies. In addition to that, Sterling is 1.29 times more volatile than Waaree Energies Limited. It trades about -0.22 of its total potential returns per unit of risk. Waaree Energies Limited is currently generating about -0.05 per unit of volatility. If you would invest  277,545  in Waaree Energies Limited on December 28, 2024 and sell it today you would lose (33,960) from holding Waaree Energies Limited or give up 12.24% of portfolio value over 90 days.

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

Sterling and Wilson  vs.  Waaree Energies Limited

Sterling and Wilson

Risk-Adjusted Performance

Very Weak

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

Waaree Energies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Waaree Energies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Sterling and Waaree Energies

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

The idea behind Sterling and Wilson and Waaree Energies Limited 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.