Correlation Between Sterling Construction and Grand Canyon

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

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

Diversification Opportunities for Sterling Construction and Grand Canyon

-0.07

Correlation Coefficient

Sterling Construction  Grand Canyon

Good diversification

The 3 months correlation between Sterling and Grand is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and Grand Canyon Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand Canyon Education 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 Grand Canyon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand Canyon Education has no effect on the direction of Sterling Construction i.e., Sterling Construction and Grand Canyon go up and down completely randomly.

Pair Corralation between Sterling Construction and Grand Canyon

Assuming the 90 days horizon Sterling Construction is expected to generate 1.75 times more return on investment than Grand Canyon. However, Sterling Construction is 1.75 times more volatile than Grand Canyon Education. It trades about 0.34 of its potential returns per unit of risk. Grand Canyon Education is currently generating about 0.01 per unit of risk. If you would invest  11,735  in Sterling Construction on April 20, 2025 and sell it today you would earn a total of  9,915  from holding Sterling Construction or generate 84.49% return on investment over 90 days.

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

Sterling Construction  vs.  Grand Canyon Education

Sterling Construction

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Construction are ranked lower than 26 (%) 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.

Grand Canyon Education

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grand Canyon Education has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Grand Canyon is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sterling Construction and Grand Canyon

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

The idea behind Sterling Construction and Grand Canyon Education 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.