Correlation Between Henderson Land and Power Assets

Can any of the company-specific risk be diversified away by investing in both Henderson Land and Power Assets 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 Power Assets 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 Power Assets Holdings, you can compare the effects of market volatilities on Henderson Land and Power Assets 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 Power Assets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Henderson Land and Power Assets.

Diversification Opportunities for Henderson Land and Power Assets

0.4

Correlation Coefficient

Henderson Land  Power Assets

Very weak diversification

The 3 months correlation between Henderson and Power is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Henderson Land Development and Power Assets Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Assets Holdings 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 Power Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Assets Holdings has no effect on the direction of Henderson Land i.e., Henderson Land and Power Assets go up and down completely randomly.

Pair Corralation between Henderson Land and Power Assets

Assuming the 90 days horizon Henderson Land Development is expected to generate 0.84 times more return on investment than Power Assets. However, Henderson Land Development is 1.18 times less risky than Power Assets. It trades about -0.01 of its potential returns per unit of risk. Power Assets Holdings is currently generating about -0.05 per unit of risk. If you would invest  292.00  in Henderson Land Development on December 22, 2024 and sell it today you would lose (6.00) from holding Henderson Land Development or give up 2.05% of portfolio value over 90 days.

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

Henderson Land Development  vs.  Power Assets Holdings

Henderson Land Devel

Risk-Adjusted Performance

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 fairly strong fundamental indicators, Henderson Land is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Power Assets Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Power Assets Holdings 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 strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Henderson Land and Power Assets

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

The idea behind Henderson Land Development and Power Assets Holdings 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.