Correlation Between Sterling Construction and CANON MARKETING

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

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

Diversification Opportunities for Sterling Construction and CANON MARKETING

0.63

Correlation Coefficient

Sterling Construction  CANON MARKETING

Poor diversification

The 3 months correlation between Sterling and CANON is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and CANON MARKETING JP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CANON MARKETING JP 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 CANON MARKETING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CANON MARKETING JP has no effect on the direction of Sterling Construction i.e., Sterling Construction and CANON MARKETING go up and down completely randomly.

Pair Corralation between Sterling Construction and CANON MARKETING

Assuming the 90 days horizon Sterling Construction is expected to under-perform the CANON MARKETING. In addition to that, Sterling Construction is 2.4 times more volatile than CANON MARKETING JP. It trades about -0.24 of its total potential returns per unit of risk. CANON MARKETING JP is currently generating about 0.28 per unit of volatility. If you would invest  2,940  in CANON MARKETING JP on September 27, 2024 and sell it today you would earn a total of  180.00  from holding CANON MARKETING JP or generate 6.12% return on investment over 90 days.

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

Sterling Construction  vs.  CANON MARKETING JP

Sterling Construction

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Construction are ranked lower than 11 (%) 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.

CANON MARKETING JP

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CANON MARKETING JP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking indicators, CANON MARKETING may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sterling Construction and CANON MARKETING

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

The idea behind Sterling Construction and CANON MARKETING JP 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.