Correlation Between LH Shopping and Prime Office

Can any of the company-specific risk be diversified away by investing in both LH Shopping and Prime Office 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 LH Shopping and Prime Office into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LH Shopping Centers and Prime Office Leasehold, you can compare the effects of market volatilities on LH Shopping and Prime Office 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 LH Shopping with a short position of Prime Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of LH Shopping and Prime Office.

Diversification Opportunities for LH Shopping and Prime Office

-0.57

Correlation Coefficient

LH Shopping  Prime Office

Excellent diversification

The 3 months correlation between LHSC and Prime is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding LH Shopping Centers and Prime Office Leasehold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Office Leasehold and LH Shopping 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 LH Shopping Centers are associated (or correlated) with Prime Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Office Leasehold has no effect on the direction of LH Shopping i.e., LH Shopping and Prime Office go up and down completely randomly.

Pair Corralation between LH Shopping and Prime Office

Assuming the 90 days trading horizon LH Shopping Centers is expected to generate 0.86 times more return on investment than Prime Office. However, LH Shopping Centers is 1.16 times less risky than Prime Office. It trades about 0.16 of its potential returns per unit of risk. Prime Office Leasehold is currently generating about -0.1 per unit of risk. If you would invest  1,110  in LH Shopping Centers on December 30, 2024 and sell it today you would earn a total of  100.00  from holding LH Shopping Centers or generate 9.01% return on investment over 90 days.

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

LH Shopping Centers  vs.  Prime Office Leasehold

LH Shopping Centers

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LH Shopping Centers are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, LH Shopping may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Prime Office Leasehold

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prime Office Leasehold has generated negative risk-adjusted returns adding no value to fund investors. Despite quite persistent forward-looking signals, Prime Office is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with LH Shopping and Prime Office

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

The idea behind LH Shopping Centers and Prime Office Leasehold 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.