Correlation Between Sterling Construction and Suntory Beverage

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

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

Diversification Opportunities for Sterling Construction and Suntory Beverage

0.06

Correlation Coefficient

Sterling Construction  Suntory Beverage

Significant diversification

The 3 months correlation between Sterling and Suntory is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and Suntory Beverage Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suntory Beverage Food 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 Suntory Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suntory Beverage Food has no effect on the direction of Sterling Construction i.e., Sterling Construction and Suntory Beverage go up and down completely randomly.

Pair Corralation between Sterling Construction and Suntory Beverage

Assuming the 90 days horizon Sterling Construction is expected to under-perform the Suntory Beverage. In addition to that, Sterling Construction is 3.19 times more volatile than Suntory Beverage Food. It trades about -0.09 of its total potential returns per unit of risk. Suntory Beverage Food is currently generating about -0.02 per unit of volatility. If you would invest  3,052  in Suntory Beverage Food on December 22, 2024 and sell it today you would lose (84.00) from holding Suntory Beverage Food or give up 2.75% of portfolio value over 90 days.

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

Sterling Construction  vs.  Suntory Beverage Food

Sterling Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sterling Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Suntory Beverage Food

Risk-Adjusted Performance

Very Weak

Over the last 90 days Suntory Beverage Food has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Suntory Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sterling Construction and Suntory Beverage

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

The idea behind Sterling Construction and Suntory Beverage Food 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.