Correlation Between Sterling Construction and COPLAND ROAD

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

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

Diversification Opportunities for Sterling Construction and COPLAND ROAD

-0.15

Correlation Coefficient

Sterling Construction  COPLAND ROAD

Good diversification

The 3 months correlation between Sterling and COPLAND is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and COPLAND ROAD CAPITAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COPLAND ROAD CAPITAL 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 COPLAND ROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COPLAND ROAD CAPITAL has no effect on the direction of Sterling Construction i.e., Sterling Construction and COPLAND ROAD go up and down completely randomly.

Pair Corralation between Sterling Construction and COPLAND ROAD

Assuming the 90 days horizon Sterling Construction is expected to generate 1.41 times more return on investment than COPLAND ROAD. However, Sterling Construction is 1.41 times more volatile than COPLAND ROAD CAPITAL. It trades about 0.07 of its potential returns per unit of risk. COPLAND ROAD CAPITAL is currently generating about 0.07 per unit of risk. If you would invest  14,360  in Sterling Construction on October 11, 2024 and sell it today you would earn a total of  1,640  from holding Sterling Construction or generate 11.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Sterling Construction  vs.  COPLAND ROAD CAPITAL

Sterling Construction

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Construction are ranked lower than 5 (%) 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.

COPLAND ROAD CAPITAL

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in COPLAND ROAD CAPITAL are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, COPLAND ROAD may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sterling Construction and COPLAND ROAD

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

The idea behind Sterling Construction and COPLAND ROAD CAPITAL 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.