Correlation Between Sterling Construction and Peel Mining

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

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

Diversification Opportunities for Sterling Construction and Peel Mining

0.37

Correlation Coefficient

Sterling Construction  Peel Mining

Weak diversification

The 3 months correlation between Sterling and Peel is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and Peel Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peel Mining Limited 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 Peel Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peel Mining Limited has no effect on the direction of Sterling Construction i.e., Sterling Construction and Peel Mining go up and down completely randomly.

Pair Corralation between Sterling Construction and Peel Mining

Assuming the 90 days horizon Sterling Construction is expected to under-perform the Peel Mining. In addition to that, Sterling Construction is 1.21 times more volatile than Peel Mining Limited. It trades about -0.13 of its total potential returns per unit of risk. Peel Mining Limited is currently generating about -0.1 per unit of volatility. If you would invest  6.95  in Peel Mining Limited on December 20, 2024 and sell it today you would lose (1.75) from holding Peel Mining Limited or give up 25.18% of portfolio value over 90 days.

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

Sterling Construction  vs.  Peel Mining Limited

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 unfluctuating 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.

Peel Mining Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Peel Mining Limited 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.

Pair Trading with Sterling Construction and Peel Mining

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

The idea behind Sterling Construction and Peel Mining Limited 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.