Correlation Between Sterling Construction and Thermo Fisher

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

By analyzing existing cross correlation between Sterling Construction and Thermo Fisher Scientific, you can compare the effects of market volatilities on Sterling Construction and Thermo Fisher 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 Thermo Fisher. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Construction and Thermo Fisher.

Diversification Opportunities for Sterling Construction and Thermo Fisher

-0.8

Correlation Coefficient

Sterling Construction  Thermo Fisher

Pay attention - limited upside

The 3 months correlation between Sterling and Thermo is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and Thermo Fisher Scientific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thermo Fisher Scientific 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 Thermo Fisher. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thermo Fisher Scientific has no effect on the direction of Sterling Construction i.e., Sterling Construction and Thermo Fisher go up and down completely randomly.

Pair Corralation between Sterling Construction and Thermo Fisher

Assuming the 90 days horizon Sterling Construction is expected to generate 1.7 times more return on investment than Thermo Fisher. However, Sterling Construction is 1.7 times more volatile than Thermo Fisher Scientific. It trades about 0.04 of its potential returns per unit of risk. Thermo Fisher Scientific is currently generating about -0.05 per unit of risk. If you would invest  17,730  in Sterling Construction on September 14, 2024 and sell it today you would earn a total of  340.00  from holding Sterling Construction or generate 1.92% 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.  Thermo Fisher Scientific

Sterling Construction

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Construction are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sterling Construction reported solid returns over the last few months and may actually be approaching a breakup point.

Thermo Fisher Scientific

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sterling Construction and Thermo Fisher

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

The idea behind Sterling Construction and Thermo Fisher Scientific 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.