Correlation Between IShares Core and Sterling Capital

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

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

Diversification Opportunities for IShares Core and Sterling Capital

0.88

Correlation Coefficient

IShares Core  Sterling Capital

Very poor diversification

The 3 months correlation between IShares and Sterling is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and Sterling Capital Focus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Focus and IShares Core 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 iShares Core SP 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 Focus has no effect on the direction of IShares Core i.e., IShares Core and Sterling Capital go up and down completely randomly.

Pair Corralation between IShares Core and Sterling Capital

Given the investment horizon of 90 days iShares Core SP is expected to generate 0.73 times more return on investment than Sterling Capital. However, iShares Core SP is 1.37 times less risky than Sterling Capital. It trades about 0.1 of its potential returns per unit of risk. Sterling Capital Focus is currently generating about 0.06 per unit of risk. If you would invest  8,483  in iShares Core SP on August 26, 2024 and sell it today you would earn a total of  5,254  from holding iShares Core SP or generate 61.94% return on investment over 90 days.

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

iShares Core SP  vs.  Sterling Capital Focus

iShares Core SP

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Sterling Capital Focus

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Capital Focus are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal fundamental indicators, Sterling Capital may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with IShares Core and Sterling Capital

The main advantage of trading using opposite IShares Core and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 iShares Core SP and Sterling Capital Focus 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.