Correlation Between Global Gold and Sterling Capital

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

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

Diversification Opportunities for Global Gold and Sterling Capital

-0.25

Correlation Coefficient

Global Gold  Sterling Capital

Very good diversification

The 3 months correlation between GLOBAL and Sterling is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Global Gold Fund and Sterling Capital South in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital South and Global Gold 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 Global Gold Fund 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 South has no effect on the direction of Global Gold i.e., Global Gold and Sterling Capital go up and down completely randomly.

Pair Corralation between Global Gold and Sterling Capital

Assuming the 90 days horizon Global Gold Fund is expected to generate 11.07 times more return on investment than Sterling Capital. However, Global Gold is 11.07 times more volatile than Sterling Capital South. It trades about 0.05 of its potential returns per unit of risk. Sterling Capital South is currently generating about 0.03 per unit of risk. If you would invest  1,294  in Global Gold Fund on September 3, 2024 and sell it today you would earn a total of  60.00  from holding Global Gold Fund or generate 4.64% return on investment over 90 days.

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

Global Gold Fund  vs.  Sterling Capital South

Global Gold Fund

Risk-Adjusted Performance

3 of 100

Insignificant

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

Sterling Capital South

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Capital South are ranked lower than 2 (%) 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.

Pair Trading with Global Gold and Sterling Capital

The main advantage of trading using opposite Global Gold and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Gold 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 Global Gold Fund and Sterling Capital South 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.