Correlation Between Sterling Construction and ABO GROUP

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

By analyzing existing cross correlation between Sterling Construction and ABO GROUP ENVIRONMENT, you can compare the effects of market volatilities on Sterling Construction and ABO GROUP 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 ABO GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Construction and ABO GROUP.

Diversification Opportunities for Sterling Construction and ABO GROUP

-0.83

Correlation Coefficient

Sterling Construction  ABO GROUP

Pay attention - limited upside

The 3 months correlation between Sterling and ABO is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and ABO GROUP ENVIRONMENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABO GROUP ENVIRONMENT 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 ABO GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABO GROUP ENVIRONMENT has no effect on the direction of Sterling Construction i.e., Sterling Construction and ABO GROUP go up and down completely randomly.

Pair Corralation between Sterling Construction and ABO GROUP

Assuming the 90 days horizon Sterling Construction is expected to generate 1.78 times more return on investment than ABO GROUP. However, Sterling Construction is 1.78 times more volatile than ABO GROUP ENVIRONMENT. It trades about 0.12 of its potential returns per unit of risk. ABO GROUP ENVIRONMENT is currently generating about -0.03 per unit of risk. If you would invest  10,875  in Sterling Construction on September 19, 2024 and sell it today you would earn a total of  5,935  from holding Sterling Construction or generate 54.57% return on investment over 90 days.

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

Sterling Construction  vs.  ABO GROUP ENVIRONMENT

Sterling Construction

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Construction are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sterling Construction reported solid returns over the last few months and may actually be approaching a breakup point.

ABO GROUP ENVIRONMENT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABO GROUP ENVIRONMENT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Sterling Construction and ABO GROUP

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

The idea behind Sterling Construction and ABO GROUP ENVIRONMENT 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.