Correlation Between Sterling Construction and TUI AG

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

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

Diversification Opportunities for Sterling Construction and TUI AG

0.47

Correlation Coefficient

Sterling Construction  TUI AG

Very weak diversification

The 3 months correlation between Sterling and TUI is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and TUI AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TUI AG and Sterling Construction 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 Construction are associated (or correlated) with TUI AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TUI AG has no effect on the direction of Sterling Construction i.e., Sterling Construction and TUI AG go up and down completely randomly.

Pair Corralation between Sterling Construction and TUI AG

Assuming the 90 days horizon Sterling Construction is expected to generate 0.9 times more return on investment than TUI AG. However, Sterling Construction is 1.11 times less risky than TUI AG. It trades about 0.27 of its potential returns per unit of risk. TUI AG is currently generating about 0.06 per unit of risk. If you would invest  14,710  in Sterling Construction on May 4, 2025 and sell it today you would earn a total of  8,110  from holding Sterling Construction or generate 55.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.48%
Values	Daily Returns

Sterling Construction  vs.  TUI AG

Sterling Construction

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Construction are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Sterling Construction reported solid returns over the last few months and may actually be approaching a breakup point.

TUI AG

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TUI AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, TUI AG may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Sterling Construction and TUI AG

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

The idea behind Sterling Construction and TUI AG 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.