Correlation Between Sterling Capital and Financial Industries

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

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

Diversification Opportunities for Sterling Capital and Financial Industries

0.64

Correlation Coefficient

Sterling Capital  Financial Industries

Poor diversification

The 3 months correlation between Sterling and Financial is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Capital Short and Financial Industries Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Industries and Sterling Capital 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 Capital Short are associated (or correlated) with Financial Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Industries has no effect on the direction of Sterling Capital i.e., Sterling Capital and Financial Industries go up and down completely randomly.

Pair Corralation between Sterling Capital and Financial Industries

Assuming the 90 days horizon Sterling Capital Short is expected to generate 0.14 times more return on investment than Financial Industries. However, Sterling Capital Short is 7.33 times less risky than Financial Industries. It trades about 0.21 of its potential returns per unit of risk. Financial Industries Fund is currently generating about 0.01 per unit of risk. If you would invest  828.00  in Sterling Capital Short on May 14, 2025 and sell it today you would earn a total of  12.00  from holding Sterling Capital Short or generate 1.45% return on investment over 90 days.

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

Sterling Capital Short  vs.  Financial Industries Fund

Sterling Capital Short

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Capital Short are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Sterling Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Financial Industries

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Financial Industries Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Financial Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sterling Capital and Financial Industries

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

The idea behind Sterling Capital Short and Financial Industries Fund 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.