Correlation Between Lendlease and Gamma Communications

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

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

Diversification Opportunities for Lendlease and Gamma Communications

0.49

Correlation Coefficient

Lendlease  Gamma Communications

Very weak diversification

The 3 months correlation between Lendlease and Gamma is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Lendlease Group and Gamma Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamma Communications plc 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 Gamma Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamma Communications plc has no effect on the direction of Lendlease i.e., Lendlease and Gamma Communications go up and down completely randomly.

Pair Corralation between Lendlease and Gamma Communications

Assuming the 90 days trading horizon Lendlease Group is expected to under-perform the Gamma Communications. But the stock apears to be less risky and, when comparing its historical volatility, Lendlease Group is 1.26 times less risky than Gamma Communications. The stock trades about -0.05 of its potential returns per unit of risk. The Gamma Communications plc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,560  in Gamma Communications plc on December 1, 2024 and sell it today you would earn a total of  20.00  from holding Gamma Communications plc or generate 1.28% return on investment over 90 days.

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

Lendlease Group  vs.  Gamma Communications plc

Lendlease Group

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Gamma Communications plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gamma Communications plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Lendlease and Gamma Communications

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

The idea behind Lendlease Group and Gamma Communications plc 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.