Correlation Between Sterling Construction and Cleanaway Waste

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

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

Diversification Opportunities for Sterling Construction and Cleanaway Waste

-0.21

Correlation Coefficient

Sterling Construction  Cleanaway Waste

Very good diversification

The 3 months correlation between Sterling and Cleanaway is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and Cleanaway Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cleanaway Waste Mana 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 Cleanaway Waste. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cleanaway Waste Mana has no effect on the direction of Sterling Construction i.e., Sterling Construction and Cleanaway Waste go up and down completely randomly.

Pair Corralation between Sterling Construction and Cleanaway Waste

Assuming the 90 days horizon Sterling Construction is expected to generate 1.43 times more return on investment than Cleanaway Waste. However, Sterling Construction is 1.43 times more volatile than Cleanaway Waste Management. It trades about 0.15 of its potential returns per unit of risk. Cleanaway Waste Management is currently generating about -0.06 per unit of risk. If you would invest  12,675  in Sterling Construction on September 28, 2024 and sell it today you would earn a total of  4,020  from holding Sterling Construction or generate 31.72% return on investment over 90 days.

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

Sterling Construction  vs.  Cleanaway Waste Management

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.

Cleanaway Waste Mana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cleanaway Waste Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Sterling Construction and Cleanaway Waste

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

The idea behind Sterling Construction and Cleanaway Waste Management 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.