Correlation Between Aluminumof China and Lendlease
Can any of the company-specific risk be diversified away by investing in both Aluminumof China and Lendlease 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 Aluminumof China and Lendlease into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aluminum of and Lendlease Group, you can compare the effects of market volatilities on Aluminumof China and Lendlease 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 Aluminumof China with a short position of Lendlease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aluminumof China and Lendlease.
Diversification Opportunities for Aluminumof China and Lendlease
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Aluminumof and Lendlease is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and Lendlease Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lendlease Group and Aluminumof China 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 Aluminum of are associated (or correlated) with Lendlease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lendlease Group has no effect on the direction of Aluminumof China i.e., Aluminumof China and Lendlease go up and down completely randomly.
Pair Corralation between Aluminumof China and Lendlease
Assuming the 90 days horizon Aluminum of is expected to under-perform the Lendlease. In addition to that, Aluminumof China is 4.2 times more volatile than Lendlease Group. It trades about -0.08 of its total potential returns per unit of risk. Lendlease Group is currently generating about -0.03 per unit of volatility. If you would invest 415.00 in Lendlease Group on August 25, 2024 and sell it today you would lose (4.00) from holding Lendlease Group or give up 0.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aluminum of vs. Lendlease Group
Performance |
| Timeline |
| Aluminumof China |
| Lendlease Group |
Aluminumof China and Lendlease Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aluminumof China and Lendlease
The main advantage of trading using opposite Aluminumof China and Lendlease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminumof China position performs unexpectedly, Lendlease 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 Lendlease will offset losses from the drop in Lendlease's long position.| Aluminumof China vs. Materialise NV | Aluminumof China vs. Air Transport Services | Aluminumof China vs. Martin Marietta Materials | Aluminumof China vs. Summit Materials |
| Lendlease vs. Big 5 Sporting | Lendlease vs. Electronic Arts | Lendlease vs. Samsung Electronics Co | Lendlease vs. ALERION CLEANPOWER |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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