Correlation Between Ameresco and Sterling Construction

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

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

Diversification Opportunities for Ameresco and Sterling Construction

0.8

Correlation Coefficient

Ameresco  Sterling Construction

Very poor diversification

The 3 months correlation between Ameresco and Sterling is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Ameresco and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction and Ameresco 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 Ameresco are associated (or correlated) with Sterling Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Construction has no effect on the direction of Ameresco i.e., Ameresco and Sterling Construction go up and down completely randomly.

Pair Corralation between Ameresco and Sterling Construction

Given the investment horizon of 90 days Ameresco is expected to under-perform the Sterling Construction. In addition to that, Ameresco is 1.28 times more volatile than Sterling Construction. It trades about -0.16 of its total potential returns per unit of risk. Sterling Construction is currently generating about -0.03 per unit of volatility. If you would invest  16,352  in Sterling Construction on January 10, 2025 and sell it today you would lose (2,899) from holding Sterling Construction or give up 17.73% of portfolio value over 90 days.

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

Ameresco  vs.  Sterling Construction

Ameresco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ameresco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in May 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 latest unsteady performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Ameresco and Sterling Construction

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

The idea behind Ameresco and Sterling Construction 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..