Correlation Between Hong Kong and Landsea Homes

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

By analyzing existing cross correlation between Hong Kong Land and Landsea Homes Corp, you can compare the effects of market volatilities on Hong Kong and Landsea Homes 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 Hong Kong with a short position of Landsea Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Kong and Landsea Homes.

Diversification Opportunities for Hong Kong and Landsea Homes

0.65

Correlation Coefficient

Hong Kong  Landsea Homes

Poor diversification

The 3 months correlation between Hong and Landsea is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Hong Kong Land and Landsea Homes Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Landsea Homes Corp and Hong Kong 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 Hong Kong Land are associated (or correlated) with Landsea Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Landsea Homes Corp has no effect on the direction of Hong Kong i.e., Hong Kong and Landsea Homes go up and down completely randomly.

Pair Corralation between Hong Kong and Landsea Homes

Assuming the 90 days horizon Hong Kong Land is expected to generate 0.34 times more return on investment than Landsea Homes. However, Hong Kong Land is 2.92 times less risky than Landsea Homes. It trades about -0.01 of its potential returns per unit of risk. Landsea Homes Corp is currently generating about -0.14 per unit of risk. If you would invest  2,200  in Hong Kong Land on December 1, 2024 and sell it today you would lose (22.00) from holding Hong Kong Land or give up 1.0% of portfolio value over 90 days.

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

Hong Kong Land  vs.  Landsea Homes Corp

Hong Kong Land

Risk-Adjusted Performance

Very Weak

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

Landsea Homes Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Landsea Homes Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hong Kong and Landsea Homes

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

The idea behind Hong Kong Land and Landsea Homes Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.