Correlation Between Sterling Construction and Tradegate

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

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

Diversification Opportunities for Sterling Construction and Tradegate

0.7

Correlation Coefficient

Sterling Construction  Tradegate

Poor diversification

The 3 months correlation between Sterling and Tradegate is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and Tradegate AG Wertpapierhandels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tradegate AG Wertpap 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 Tradegate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tradegate AG Wertpap has no effect on the direction of Sterling Construction i.e., Sterling Construction and Tradegate go up and down completely randomly.

Pair Corralation between Sterling Construction and Tradegate

Assuming the 90 days horizon Sterling Construction is expected to under-perform the Tradegate. In addition to that, Sterling Construction is 16.12 times more volatile than Tradegate AG Wertpapierhandelsbank. It trades about -0.09 of its total potential returns per unit of risk. Tradegate AG Wertpapierhandelsbank is currently generating about -0.12 per unit of volatility. If you would invest  8,850  in Tradegate AG Wertpapierhandelsbank on December 24, 2024 and sell it today you would lose (200.00) from holding Tradegate AG Wertpapierhandelsbank or give up 2.26% of portfolio value over 90 days.

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

Sterling Construction  vs.  Tradegate AG Wertpapierhandels

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 uncertain 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.

Tradegate AG Wertpap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tradegate AG Wertpapierhandelsbank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Tradegate is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sterling Construction and Tradegate

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

The idea behind Sterling Construction and Tradegate AG Wertpapierhandelsbank 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.