Correlation Between Bowman Consulting and Sterling Construction

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

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

Diversification Opportunities for Bowman Consulting and Sterling Construction

0.72

Correlation Coefficient

Bowman Consulting  Sterling Construction

Poor diversification

The 3 months correlation between Bowman and Sterling is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Bowman Consulting Group and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction and Bowman Consulting 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 Bowman Consulting Group 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 Bowman Consulting i.e., Bowman Consulting and Sterling Construction go up and down completely randomly.

Pair Corralation between Bowman Consulting and Sterling Construction

Given the investment horizon of 90 days Bowman Consulting Group is expected to generate 0.63 times more return on investment than Sterling Construction. However, Bowman Consulting Group is 1.6 times less risky than Sterling Construction. It trades about -0.04 of its potential returns per unit of risk. Sterling Construction is currently generating about -0.03 per unit of risk. If you would invest  2,396  in Bowman Consulting Group on January 9, 2025 and sell it today you would lose (265.00) from holding Bowman Consulting Group or give up 11.06% of portfolio value over 90 days.

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

Bowman Consulting Group  vs.  Sterling Construction

Bowman Consulting

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bowman Consulting Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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 Bowman Consulting and Sterling Construction

The main advantage of trading using opposite Bowman Consulting and Sterling Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bowman Consulting 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 Bowman Consulting Group 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 CEOs Directory module to screen CEOs from public companies around the world.