Correlation Between Transport and Sterling

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

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

Diversification Opportunities for Transport and Sterling

0.64

Correlation Coefficient

Transport  Sterling

Poor diversification

The 3 months correlation between Transport and Sterling is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Transport of and Sterling and Wilson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling and Wilson and Transport 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 Transport of are associated (or correlated) with Sterling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling and Wilson has no effect on the direction of Transport i.e., Transport and Sterling go up and down completely randomly.

Pair Corralation between Transport and Sterling

Assuming the 90 days trading horizon Transport of is expected to generate 0.62 times more return on investment than Sterling. However, Transport of is 1.6 times less risky than Sterling. It trades about 0.12 of its potential returns per unit of risk. Sterling and Wilson is currently generating about 0.03 per unit of risk. If you would invest  109,890  in Transport of on April 20, 2025 and sell it today you would earn a total of  15,020  from holding Transport of or generate 13.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Transport of  vs.  Sterling and Wilson

Transport

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transport of are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Transport exhibited solid returns over the last few months and may actually be approaching a breakup point.

Sterling and Wilson

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling and Wilson are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable essential indicators, Sterling is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Transport and Sterling

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

The idea behind Transport of and Sterling and Wilson 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.