Correlation Between Us Government and Sterling Capital

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

By analyzing existing cross correlation between Us Government Securities and Sterling Capital Intermediate, you can compare the effects of market volatilities on Us Government and Sterling Capital 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 Us Government with a short position of Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Government and Sterling Capital.

Diversification Opportunities for Us Government and Sterling Capital

0.99

Correlation Coefficient

Us Government  Sterling Capital

No risk reduction

The 3 months correlation between UGSFX and Sterling is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities and Sterling Capital Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Int and Us Government 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 Us Government Securities are associated (or correlated) with Sterling Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Capital Int has no effect on the direction of Us Government i.e., Us Government and Sterling Capital go up and down completely randomly.

Pair Corralation between Us Government and Sterling Capital

Assuming the 90 days horizon Us Government Securities is expected to under-perform the Sterling Capital. In addition to that, Us Government is 1.3 times more volatile than Sterling Capital Intermediate. It trades about -0.39 of its total potential returns per unit of risk. Sterling Capital Intermediate is currently generating about -0.4 per unit of volatility. If you would invest  871.00  in Sterling Capital Intermediate on October 9, 2024 and sell it today you would lose (14.00) from holding Sterling Capital Intermediate or give up 1.61% of portfolio value over 90 days.

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

Us Government Securities  vs.  Sterling Capital Intermediate

Us Government Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Us Government Securities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Us Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sterling Capital Int

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sterling Capital Intermediate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Sterling Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Us Government and Sterling Capital

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

The idea behind Us Government Securities and Sterling Capital Intermediate 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.