Correlation Between Sterling Construction and ASSOC BR

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

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

Diversification Opportunities for Sterling Construction and ASSOC BR

-0.56

Correlation Coefficient

Sterling Construction  ASSOC BR

Excellent diversification

The 3 months correlation between Sterling and ASSOC is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and ASSOC BR FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASSOC BR FOODS 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 ASSOC BR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASSOC BR FOODS has no effect on the direction of Sterling Construction i.e., Sterling Construction and ASSOC BR go up and down completely randomly.

Pair Corralation between Sterling Construction and ASSOC BR

Assuming the 90 days horizon Sterling Construction is expected to generate 2.22 times more return on investment than ASSOC BR. However, Sterling Construction is 2.22 times more volatile than ASSOC BR FOODS. It trades about 0.13 of its potential returns per unit of risk. ASSOC BR FOODS is currently generating about 0.04 per unit of risk. If you would invest  2,920  in Sterling Construction on October 11, 2024 and sell it today you would earn a total of  14,660  from holding Sterling Construction or generate 502.05% return on investment over 90 days.

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

Sterling Construction  vs.  ASSOC BR FOODS

Sterling Construction

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Construction are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Sterling Construction reported solid returns over the last few months and may actually be approaching a breakup point.

ASSOC BR FOODS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASSOC BR FOODS 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 ASSOC BR

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

The idea behind Sterling Construction and ASSOC BR FOODS 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.