Correlation Between Sterling Metals and Arianne Phosphate

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

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

Diversification Opportunities for Sterling Metals and Arianne Phosphate

0.61

Correlation Coefficient

Sterling Metals  Arianne Phosphate

Poor diversification

The 3 months correlation between Sterling and Arianne is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Metals Corp and Arianne Phosphate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arianne Phosphate and Sterling Metals 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 Metals Corp are associated (or correlated) with Arianne Phosphate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arianne Phosphate has no effect on the direction of Sterling Metals i.e., Sterling Metals and Arianne Phosphate go up and down completely randomly.

Pair Corralation between Sterling Metals and Arianne Phosphate

Assuming the 90 days horizon Sterling Metals Corp is expected to generate 2.21 times more return on investment than Arianne Phosphate. However, Sterling Metals is 2.21 times more volatile than Arianne Phosphate. It trades about -0.02 of its potential returns per unit of risk. Arianne Phosphate is currently generating about -0.09 per unit of risk. If you would invest  3.18  in Sterling Metals Corp on September 12, 2024 and sell it today you would lose (1.05) from holding Sterling Metals Corp or give up 33.02% of portfolio value over 90 days.

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

Sterling Metals Corp  vs.  Arianne Phosphate

Sterling Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sterling Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Arianne Phosphate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arianne Phosphate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sterling Metals and Arianne Phosphate

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

The idea behind Sterling Metals Corp and Arianne Phosphate 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.