Correlation Between Lendlease and InPlay Oil
Can any of the company-specific risk be diversified away by investing in both Lendlease and InPlay Oil 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 Lendlease and InPlay Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lendlease Group and InPlay Oil Corp, you can compare the effects of market volatilities on Lendlease and InPlay Oil 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 Lendlease with a short position of InPlay Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lendlease and InPlay Oil.
Diversification Opportunities for Lendlease and InPlay Oil
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Lendlease and InPlay is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Lendlease Group and InPlay Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InPlay Oil Corp and Lendlease 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 Lendlease Group are associated (or correlated) with InPlay Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InPlay Oil Corp has no effect on the direction of Lendlease i.e., Lendlease and InPlay Oil go up and down completely randomly.
Pair Corralation between Lendlease and InPlay Oil
Assuming the 90 days trading horizon Lendlease Group is expected to generate 1.0 times more return on investment than InPlay Oil. However, Lendlease is 1.0 times more volatile than InPlay Oil Corp. It trades about 0.01 of its potential returns per unit of risk. InPlay Oil Corp is currently generating about -0.02 per unit of risk. If you would invest 440.00 in Lendlease Group on September 4, 2024 and sell it today you would lose (3.00) from holding Lendlease Group or give up 0.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lendlease Group vs. InPlay Oil Corp
Performance |
| Timeline |
| Lendlease Group |
| InPlay Oil Corp |
Lendlease and InPlay Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lendlease and InPlay Oil
The main advantage of trading using opposite Lendlease and InPlay Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lendlease position performs unexpectedly, InPlay Oil 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 InPlay Oil will offset losses from the drop in InPlay Oil's long position.The idea behind Lendlease Group and InPlay Oil Corp 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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