Correlation Between Arrowhead Properties and Hammerson PLC

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

By analyzing existing cross correlation between Arrowhead Properties Ltd and Hammerson PLC, you can compare the effects of market volatilities on Arrowhead Properties and Hammerson PLC 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 Arrowhead Properties with a short position of Hammerson PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrowhead Properties and Hammerson PLC.

Diversification Opportunities for Arrowhead Properties and Hammerson PLC

-0.24

Correlation Coefficient

Arrowhead Properties  Hammerson PLC

Very good diversification

The 3 months correlation between Arrowhead and Hammerson is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Arrowhead Properties Ltd and Hammerson PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hammerson PLC and Arrowhead Properties 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 Arrowhead Properties Ltd are associated (or correlated) with Hammerson PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hammerson PLC has no effect on the direction of Arrowhead Properties i.e., Arrowhead Properties and Hammerson PLC go up and down completely randomly.

Pair Corralation between Arrowhead Properties and Hammerson PLC

Assuming the 90 days trading horizon Arrowhead Properties Ltd is expected to generate 0.69 times more return on investment than Hammerson PLC. However, Arrowhead Properties Ltd is 1.44 times less risky than Hammerson PLC. It trades about 0.06 of its potential returns per unit of risk. Hammerson PLC is currently generating about -0.09 per unit of risk. If you would invest  48,300  in Arrowhead Properties Ltd on December 25, 2024 and sell it today you would earn a total of  1,700  from holding Arrowhead Properties Ltd or generate 3.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Arrowhead Properties Ltd  vs.  Hammerson PLC

Arrowhead Properties

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arrowhead Properties Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Arrowhead Properties is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Hammerson PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hammerson PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Arrowhead Properties and Hammerson PLC

The main advantage of trading using opposite Arrowhead Properties and Hammerson PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrowhead Properties position performs unexpectedly, Hammerson PLC 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 Hammerson PLC will offset losses from the drop in Hammerson PLC's long position.

The idea behind Arrowhead Properties Ltd and Hammerson PLC 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.