Correlation Between Alfa Financial and Lendlease

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

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

Diversification Opportunities for Alfa Financial and Lendlease

0.32

Correlation Coefficient

Alfa Financial  Lendlease

Weak diversification

The 3 months correlation between Alfa and Lendlease is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Financial Software and Lendlease Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lendlease Group and Alfa Financial 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 Alfa Financial Software 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 Alfa Financial i.e., Alfa Financial and Lendlease go up and down completely randomly.

Pair Corralation between Alfa Financial and Lendlease

Assuming the 90 days trading horizon Alfa Financial Software is expected to generate 1.12 times more return on investment than Lendlease. However, Alfa Financial is 1.12 times more volatile than Lendlease Group. It trades about 0.03 of its potential returns per unit of risk. Lendlease Group is currently generating about -0.03 per unit of risk. If you would invest  179.00  in Alfa Financial Software on October 25, 2024 and sell it today you would earn a total of  51.00  from holding Alfa Financial Software or generate 28.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Alfa Financial Software  vs.  Lendlease Group

Alfa Financial Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alfa Financial Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Alfa Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 uncertain 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 Alfa Financial and Lendlease

The main advantage of trading using opposite Alfa Financial and Lendlease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alfa Financial 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 Alfa Financial Software 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.