Correlation Between China Railway and Lendlease

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

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

Diversification Opportunities for China Railway and Lendlease

0.28

Correlation Coefficient

China Railway  Lendlease

Modest diversification

The 3 months correlation between China and Lendlease is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding China Railway Construction and Lendlease Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lendlease Group and China Railway 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 China Railway Construction 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 China Railway i.e., China Railway and Lendlease go up and down completely randomly.

Pair Corralation between China Railway and Lendlease

Assuming the 90 days horizon China Railway Construction is expected to generate 2.38 times more return on investment than Lendlease. However, China Railway is 2.38 times more volatile than Lendlease Group. It trades about 0.05 of its potential returns per unit of risk. Lendlease Group is currently generating about -0.02 per unit of risk. If you would invest  30.00  in China Railway Construction on October 22, 2024 and sell it today you would earn a total of  34.00  from holding China Railway Construction or generate 113.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

China Railway Construction  vs.  Lendlease Group

China Railway Constr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Railway Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Lendlease Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lendlease Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with China Railway and Lendlease

The main advantage of trading using opposite China Railway and Lendlease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Railway 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.

The idea behind China Railway Construction and Lendlease Group 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.