Correlation Between Henderson Land and City Developments

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

By analyzing existing cross correlation between Henderson Land Development and City Developments, you can compare the effects of market volatilities on Henderson Land and City Developments 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 Henderson Land with a short position of City Developments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Henderson Land and City Developments.

Diversification Opportunities for Henderson Land and City Developments

0.7

Correlation Coefficient

Henderson Land  City Developments

Poor diversification

The 3 months correlation between Henderson and City is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Henderson Land Development and City Developments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Developments and Henderson Land 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 Henderson Land Development are associated (or correlated) with City Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Developments has no effect on the direction of Henderson Land i.e., Henderson Land and City Developments go up and down completely randomly.

Pair Corralation between Henderson Land and City Developments

Assuming the 90 days horizon Henderson Land Development is expected to generate 1.53 times more return on investment than City Developments. However, Henderson Land is 1.53 times more volatile than City Developments. It trades about -0.01 of its potential returns per unit of risk. City Developments is currently generating about -0.06 per unit of risk. If you would invest  321.00  in Henderson Land Development on October 27, 2024 and sell it today you would lose (45.00) from holding Henderson Land Development or give up 14.02% of portfolio value over 90 days.

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

Henderson Land Development  vs.  City Developments

Henderson Land Devel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Henderson Land Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

City Developments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days City Developments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, City Developments is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Henderson Land and City Developments

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

The idea behind Henderson Land Development and City Developments 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.