Correlation Between Federated Government and Sterling Capital

Can any of the company-specific risk be diversified away by investing in both Federated 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 Federated 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 Federated Government Income and Sterling Capital Porate, you can compare the effects of market volatilities on Federated 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 Federated Government with a short position of Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Government and Sterling Capital.

Diversification Opportunities for Federated Government and Sterling Capital

0.84

Correlation Coefficient

Federated Government  Sterling Capital

Very poor diversification

The 3 months correlation between Federated and Sterling is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Federated Government Income and Sterling Capital Porate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Porate and Federated 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 Federated Government Income 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 Porate has no effect on the direction of Federated Government i.e., Federated Government and Sterling Capital go up and down completely randomly.

Pair Corralation between Federated Government and Sterling Capital

Assuming the 90 days horizon Federated Government is expected to generate 3.62 times less return on investment than Sterling Capital. But when comparing it to its historical volatility, Federated Government Income is 1.38 times less risky than Sterling Capital. It trades about 0.05 of its potential returns per unit of risk. Sterling Capital Porate is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  657.00  in Sterling Capital Porate on May 5, 2025 and sell it today you would earn a total of  28.00  from holding Sterling Capital Porate or generate 4.26% return on investment over 90 days.

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

Federated Government Income  vs.  Sterling Capital Porate

Federated Government

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Government Income are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Federated Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sterling Capital Porate

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Capital Porate are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. 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 Federated Government and Sterling Capital

The main advantage of trading using opposite Federated Government and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated 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 Federated Government Income and Sterling Capital Porate 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.