Correlation Between Henderson Land and New World

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

Diversification Opportunities for Henderson Land and New World

0.62

Correlation Coefficient

Henderson Land  New World

Poor diversification

The 3 months correlation between Henderson and New is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Henderson Land Development and New World Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New World Development 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 New World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New World Development has no effect on the direction of Henderson Land i.e., Henderson Land and New World go up and down completely randomly.

Pair Corralation between Henderson Land and New World

Assuming the 90 days horizon Henderson Land Development is expected to under-perform the New World. But the pink sheet apears to be less risky and, when comparing its historical volatility, Henderson Land Development is 5.12 times less risky than New World. The pink sheet trades about -0.06 of its potential returns per unit of risk. The New World Development is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  35.00  in New World Development on December 29, 2024 and sell it today you would earn a total of  1.00  from holding New World Development or generate 2.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Henderson Land Development  vs.  New World Development

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 latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

New World Development

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New World Development are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, New World showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Henderson Land and New World

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

The idea behind Henderson Land Development and New World Development 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.