Correlation Between Sterling Construction and Gecina SA

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

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

Diversification Opportunities for Sterling Construction and Gecina SA

-0.84

Correlation Coefficient

Sterling Construction  Gecina SA

Pay attention - limited upside

The 3 months correlation between Sterling and Gecina is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and Gecina SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gecina SA and Sterling Construction 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 Construction are associated (or correlated) with Gecina SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gecina SA has no effect on the direction of Sterling Construction i.e., Sterling Construction and Gecina SA go up and down completely randomly.

Pair Corralation between Sterling Construction and Gecina SA

Assuming the 90 days horizon Sterling Construction is expected to generate 2.68 times more return on investment than Gecina SA. However, Sterling Construction is 2.68 times more volatile than Gecina SA. It trades about 0.13 of its potential returns per unit of risk. Gecina SA is currently generating about -0.23 per unit of risk. If you would invest  13,305  in Sterling Construction on September 20, 2024 and sell it today you would earn a total of  3,505  from holding Sterling Construction or generate 26.34% return on investment over 90 days.

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

Sterling Construction  vs.  Gecina SA

Sterling Construction

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Construction are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Sterling Construction reported solid returns over the last few months and may actually be approaching a breakup point.

Gecina SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gecina SA 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 Construction and Gecina SA

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

The idea behind Sterling Construction and Gecina SA 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.