Correlation Between Lendlease and Globe Metals

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

By analyzing existing cross correlation between Lendlease Group and Globe Metals Mining, you can compare the effects of market volatilities on Lendlease and Globe Metals 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 Lendlease with a short position of Globe Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lendlease and Globe Metals.

Diversification Opportunities for Lendlease and Globe Metals

-0.11

Correlation Coefficient

Lendlease  Globe Metals

Good diversification

The 3 months correlation between Lendlease and Globe is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Lendlease Group and Globe Metals Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globe Metals Mining and Lendlease 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 Lendlease Group are associated (or correlated) with Globe Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globe Metals Mining has no effect on the direction of Lendlease i.e., Lendlease and Globe Metals go up and down completely randomly.

Pair Corralation between Lendlease and Globe Metals

Assuming the 90 days trading horizon Lendlease Group is expected to under-perform the Globe Metals. But the stock apears to be less risky and, when comparing its historical volatility, Lendlease Group is 3.24 times less risky than Globe Metals. The stock trades about -0.08 of its potential returns per unit of risk. The Globe Metals Mining is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  4.60  in Globe Metals Mining on September 15, 2024 and sell it today you would lose (0.50) from holding Globe Metals Mining or give up 10.87% of portfolio value over 90 days.

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

Lendlease Group  vs.  Globe Metals Mining

Lendlease Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lendlease Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Globe Metals Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Globe Metals Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Globe Metals is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Lendlease and Globe Metals

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

The idea behind Lendlease Group and Globe Metals Mining 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.