Correlation Between NORTHEAST UTILITIES and Lendlease
Can any of the company-specific risk be diversified away by investing in both NORTHEAST UTILITIES 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 NORTHEAST UTILITIES and Lendlease into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NORTHEAST UTILITIES and Lendlease Group, you can compare the effects of market volatilities on NORTHEAST UTILITIES 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 NORTHEAST UTILITIES with a short position of Lendlease. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORTHEAST UTILITIES and Lendlease.
Diversification Opportunities for NORTHEAST UTILITIES and Lendlease
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NORTHEAST and Lendlease is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding NORTHEAST UTILITIES and Lendlease Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lendlease Group and NORTHEAST UTILITIES 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 NORTHEAST UTILITIES 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 NORTHEAST UTILITIES i.e., NORTHEAST UTILITIES and Lendlease go up and down completely randomly.
Pair Corralation between NORTHEAST UTILITIES and Lendlease
Assuming the 90 days trading horizon NORTHEAST UTILITIES is expected to under-perform the Lendlease. But the stock apears to be less risky and, when comparing its historical volatility, NORTHEAST UTILITIES is 1.4 times less risky than Lendlease. The stock trades about -0.03 of its potential returns per unit of risk. The Lendlease Group is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 515.00 in Lendlease Group on October 29, 2024 and sell it today you would lose (134.00) from holding Lendlease Group or give up 26.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NORTHEAST UTILITIES vs. Lendlease Group
Performance |
| Timeline |
| NORTHEAST UTILITIES |
| Lendlease Group |
NORTHEAST UTILITIES and Lendlease Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NORTHEAST UTILITIES and Lendlease
The main advantage of trading using opposite NORTHEAST UTILITIES and Lendlease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORTHEAST UTILITIES 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.| NORTHEAST UTILITIES vs. FAST RETAIL ADR | NORTHEAST UTILITIES vs. ECHO INVESTMENT ZY | NORTHEAST UTILITIES vs. Apollo Investment Corp | NORTHEAST UTILITIES vs. AEON STORES |
| Lendlease vs. Citic Telecom International | Lendlease vs. TELECOM ITALIA | Lendlease vs. SK TELECOM TDADR | Lendlease vs. Chunghwa Telecom Co |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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