Correlation Between Sterling Capital and Mid-cap Growth

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

By analyzing existing cross correlation between Sterling Capital Ultra and Mid Cap Growth Profund, you can compare the effects of market volatilities on Sterling Capital and Mid-cap Growth 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 Mid-cap Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Capital and Mid-cap Growth.

Diversification Opportunities for Sterling Capital and Mid-cap Growth

0.72

Correlation Coefficient

Sterling Capital  Mid-cap Growth

Poor diversification

The 3 months correlation between Sterling and Mid-cap is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Capital Ultra and Mid Cap Growth Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Growth 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 Ultra are associated (or correlated) with Mid-cap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Growth has no effect on the direction of Sterling Capital i.e., Sterling Capital and Mid-cap Growth go up and down completely randomly.

Pair Corralation between Sterling Capital and Mid-cap Growth

Assuming the 90 days horizon Sterling Capital is expected to generate 10.87 times less return on investment than Mid-cap Growth. But when comparing it to its historical volatility, Sterling Capital Ultra is 12.08 times less risky than Mid-cap Growth. It trades about 0.21 of its potential returns per unit of risk. Mid Cap Growth Profund is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  10,391  in Mid Cap Growth Profund on September 1, 2024 and sell it today you would earn a total of  1,173  from holding Mid Cap Growth Profund or generate 11.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Sterling Capital Ultra  vs.  Mid Cap Growth Profund

Sterling Capital Ultra

Risk-Adjusted Performance

16 of 100

Solid

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

Mid Cap Growth

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Growth Profund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Mid-cap Growth may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Sterling Capital and Mid-cap Growth

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

The idea behind Sterling Capital Ultra and Mid Cap Growth Profund 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.