Correlation Between NV5 Global and Sterling Construction

Can any of the company-specific risk be diversified away by investing in both NV5 Global and Sterling Construction 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 NV5 Global and Sterling Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NV5 Global and Sterling Construction, you can compare the effects of market volatilities on NV5 Global and Sterling Construction 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 NV5 Global with a short position of Sterling Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of NV5 Global and Sterling Construction.

Diversification Opportunities for NV5 Global and Sterling Construction

-0.15

Correlation Coefficient

NV5 Global  Sterling Construction

Good diversification

The 3 months correlation between NV5 and Sterling is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding NV5 Global and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction and NV5 Global 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 NV5 Global are associated (or correlated) with Sterling Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Construction has no effect on the direction of NV5 Global i.e., NV5 Global and Sterling Construction go up and down completely randomly.

Pair Corralation between NV5 Global and Sterling Construction

Given the investment horizon of 90 days NV5 Global is expected to under-perform the Sterling Construction. But the stock apears to be less risky and, when comparing its historical volatility, NV5 Global is 1.67 times less risky than Sterling Construction. The stock trades about -0.07 of its potential returns per unit of risk. The Sterling Construction is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  11,953  in Sterling Construction on August 30, 2024 and sell it today you would earn a total of  7,588  from holding Sterling Construction or generate 63.48% return on investment over 90 days.

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

NV5 Global  vs.  Sterling Construction

NV5 Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NV5 Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Sterling Construction

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Construction are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite sluggish basic indicators, Sterling Construction disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NV5 Global and Sterling Construction

The main advantage of trading using opposite NV5 Global and Sterling Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NV5 Global position performs unexpectedly, Sterling Construction 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 Construction will offset losses from the drop in Sterling Construction's long position.

The idea behind NV5 Global and Sterling Construction 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.