Correlation Between Mid Cap and Sterling Capital

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

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

Diversification Opportunities for Mid Cap and Sterling Capital

-0.54

Correlation Coefficient

Mid Cap  Sterling Capital

Excellent diversification

The 3 months correlation between Mid and Sterling is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Growth and Sterling Capital Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Int and Mid Cap 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 Mid Cap Growth 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 Int has no effect on the direction of Mid Cap i.e., Mid Cap and Sterling Capital go up and down completely randomly.

Pair Corralation between Mid Cap and Sterling Capital

Assuming the 90 days horizon Mid Cap Growth is expected to under-perform the Sterling Capital. In addition to that, Mid Cap is 7.05 times more volatile than Sterling Capital Intermediate. It trades about -0.07 of its total potential returns per unit of risk. Sterling Capital Intermediate is currently generating about 0.18 per unit of volatility. If you would invest  851.00  in Sterling Capital Intermediate on December 21, 2024 and sell it today you would earn a total of  22.00  from holding Sterling Capital Intermediate or generate 2.59% return on investment over 90 days.

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

Mid Cap Growth  vs.  Sterling Capital Intermediate

Mid Cap Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mid Cap Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Sterling Capital Int

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Capital Intermediate are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, 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 Mid Cap and Sterling Capital

The main advantage of trading using opposite Mid Cap and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap 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 Mid Cap Growth and Sterling Capital Intermediate 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.