Correlation Between Vanguard and Sterling Capital

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

By analyzing existing cross correlation between Vanguard SP 500 and Sterling Capital Focus, you can compare the effects of market volatilities on Vanguard 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 Vanguard with a short position of Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Sterling Capital.

Diversification Opportunities for Vanguard and Sterling Capital

-0.5

Correlation Coefficient

Vanguard  Sterling Capital

Very good diversification

The 3 months correlation between Vanguard and Sterling is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 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 Vanguard 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 Vanguard SP 500 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 Vanguard i.e., Vanguard and Sterling Capital go up and down completely randomly.

Pair Corralation between Vanguard and Sterling Capital

Given the investment horizon of 90 days Vanguard SP 500 is expected to generate 0.84 times more return on investment than Sterling Capital. However, Vanguard SP 500 is 1.19 times less risky than Sterling Capital. It trades about 0.32 of its potential returns per unit of risk. Sterling Capital Focus is currently generating about -0.09 per unit of risk. If you would invest  31,806  in Vanguard SP 500 on March 29, 2024 and sell it today you would earn a total of  1,797  from holding Vanguard SP 500 or generate 5.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Vanguard SP 500  vs.  Sterling Capital Focus

Vanguard SP 500

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP 500 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Vanguard may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Sterling Capital Focus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sterling Capital Focus has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's fundamental indicators remain nearly stable which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

Pair Trading with Vanguard and Sterling Capital

The main advantage of trading using opposite Vanguard and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 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 Vanguard SP 500 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.