Correlation Between Cleanaway Waste and Sterling Construction

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

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

Diversification Opportunities for Cleanaway Waste and Sterling Construction

-0.05

Correlation Coefficient

Cleanaway Waste  Sterling Construction

Good diversification

The 3 months correlation between Cleanaway and Sterling is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Cleanaway Waste Management and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction and Cleanaway Waste 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 Cleanaway Waste Management are associated (or correlated) with Sterling Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Construction has no effect on the direction of Cleanaway Waste i.e., Cleanaway Waste and Sterling Construction go up and down completely randomly.

Pair Corralation between Cleanaway Waste and Sterling Construction

Assuming the 90 days trading horizon Cleanaway Waste Management is expected to under-perform the Sterling Construction. But the stock apears to be less risky and, when comparing its historical volatility, Cleanaway Waste Management is 1.51 times less risky than Sterling Construction. The stock trades about -0.07 of its potential returns per unit of risk. The Sterling Construction is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  15,140  in Sterling Construction on October 16, 2024 and sell it today you would earn a total of  740.00  from holding Sterling Construction or generate 4.89% return on investment over 90 days.

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

Cleanaway Waste Management  vs.  Sterling Construction

Cleanaway Waste Mana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cleanaway Waste Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Sterling Construction

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Construction are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sterling Construction may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cleanaway Waste and Sterling Construction

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

The idea behind Cleanaway Waste Management and Sterling Construction 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.