Correlation Between Sterling Construction and AUST AGRICULTURAL

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

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

Diversification Opportunities for Sterling Construction and AUST AGRICULTURAL

-0.59

Correlation Coefficient

Sterling Construction  AUST AGRICULTURAL

Excellent diversification

The 3 months correlation between Sterling and AUST is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and AUST AGRICULTURAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUST AGRICULTURAL 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 AUST AGRICULTURAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUST AGRICULTURAL has no effect on the direction of Sterling Construction i.e., Sterling Construction and AUST AGRICULTURAL go up and down completely randomly.

Pair Corralation between Sterling Construction and AUST AGRICULTURAL

Assuming the 90 days horizon Sterling Construction is expected to under-perform the AUST AGRICULTURAL. In addition to that, Sterling Construction is 3.1 times more volatile than AUST AGRICULTURAL. It trades about -0.16 of its total potential returns per unit of risk. AUST AGRICULTURAL is currently generating about -0.09 per unit of volatility. If you would invest  82.00  in AUST AGRICULTURAL on October 9, 2024 and sell it today you would lose (1.00) from holding AUST AGRICULTURAL or give up 1.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.12%
Values	Daily Returns

Sterling Construction  vs.  AUST AGRICULTURAL

Sterling Construction

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Construction are ranked lower than 6 (%) 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.

AUST AGRICULTURAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AUST AGRICULTURAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AUST AGRICULTURAL is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sterling Construction and AUST AGRICULTURAL

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

The idea behind Sterling Construction and AUST AGRICULTURAL 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.