Correlation Between STERLING FINANCIAL and VETIVA BANKING

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

By analyzing existing cross correlation between STERLING FINANCIAL HOLDINGS and VETIVA BANKING ETF, you can compare the effects of market volatilities on STERLING FINANCIAL and VETIVA BANKING 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 FINANCIAL with a short position of VETIVA BANKING. Check out your portfolio center. Please also check ongoing floating volatility patterns of STERLING FINANCIAL and VETIVA BANKING.

Diversification Opportunities for STERLING FINANCIAL and VETIVA BANKING

0.49

Correlation Coefficient

STERLING FINANCIAL  VETIVA BANKING

Very weak diversification

The 3 months correlation between STERLING and VETIVA is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding STERLING FINANCIAL HOLDINGS and VETIVA BANKING ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VETIVA BANKING ETF and STERLING FINANCIAL 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 FINANCIAL HOLDINGS are associated (or correlated) with VETIVA BANKING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VETIVA BANKING ETF has no effect on the direction of STERLING FINANCIAL i.e., STERLING FINANCIAL and VETIVA BANKING go up and down completely randomly.

Pair Corralation between STERLING FINANCIAL and VETIVA BANKING

Assuming the 90 days trading horizon STERLING FINANCIAL HOLDINGS is expected to generate 3.18 times more return on investment than VETIVA BANKING. However, STERLING FINANCIAL is 3.18 times more volatile than VETIVA BANKING ETF. It trades about 0.1 of its potential returns per unit of risk. VETIVA BANKING ETF is currently generating about 0.2 per unit of risk. If you would invest  399.00  in STERLING FINANCIAL HOLDINGS on September 14, 2024 and sell it today you would earn a total of  86.00  from holding STERLING FINANCIAL HOLDINGS or generate 21.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

STERLING FINANCIAL HOLDINGS  vs.  VETIVA BANKING ETF

STERLING FINANCIAL

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in STERLING FINANCIAL HOLDINGS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, STERLING FINANCIAL displayed solid returns over the last few months and may actually be approaching a breakup point.

VETIVA BANKING ETF

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VETIVA BANKING ETF are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, VETIVA BANKING disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STERLING FINANCIAL and VETIVA BANKING

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

The idea behind STERLING FINANCIAL HOLDINGS and VETIVA BANKING ETF 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.