Correlation Between Sterling Construction and Kubota

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

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

Diversification Opportunities for Sterling Construction and Kubota

-0.68

Correlation Coefficient

Sterling Construction  Kubota

Excellent diversification

The 3 months correlation between Sterling and Kubota is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and Kubota in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kubota 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 Kubota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kubota has no effect on the direction of Sterling Construction i.e., Sterling Construction and Kubota go up and down completely randomly.

Pair Corralation between Sterling Construction and Kubota

Assuming the 90 days horizon Sterling Construction is expected to under-perform the Kubota. In addition to that, Sterling Construction is 2.88 times more volatile than Kubota. It trades about -0.08 of its total potential returns per unit of risk. Kubota is currently generating about 0.06 per unit of volatility. If you would invest  1,128  in Kubota on December 27, 2024 and sell it today you would earn a total of  62.00  from holding Kubota or generate 5.5% return on investment over 90 days.

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

Sterling Construction  vs.  Kubota

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.

Kubota

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kubota are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Kubota may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sterling Construction and Kubota

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

The idea behind Sterling Construction and Kubota 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.