Correlation Between Lendlease and Scentre

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

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

Diversification Opportunities for Lendlease and Scentre

0.76

Correlation Coefficient

Lendlease  Scentre

Poor diversification

The 3 months correlation between Lendlease and Scentre is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Lendlease Group and Scentre Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scentre Group 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 Scentre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scentre Group has no effect on the direction of Lendlease i.e., Lendlease and Scentre go up and down completely randomly.

Pair Corralation between Lendlease and Scentre

Assuming the 90 days trading horizon Lendlease Group is expected to generate 1.2 times more return on investment than Scentre. However, Lendlease is 1.2 times more volatile than Scentre Group. It trades about 0.08 of its potential returns per unit of risk. Scentre Group is currently generating about 0.09 per unit of risk. If you would invest  671.00  in Lendlease Group on September 2, 2024 and sell it today you would earn a total of  45.00  from holding Lendlease Group or generate 6.71% return on investment over 90 days.

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

Lendlease Group  vs.  Scentre Group

Lendlease Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lendlease Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Lendlease may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Scentre Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Scentre Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Scentre 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 Scentre

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

The idea behind Lendlease Group and Scentre Group 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.