Correlation Between Lend Lease and New World

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

By analyzing existing cross correlation between Lend Lease Group and New World Development, you can compare the effects of market volatilities on Lend Lease and New World 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 Lend Lease with a short position of New World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lend Lease and New World.

Diversification Opportunities for Lend Lease and New World

0.36

Correlation Coefficient

Lend Lease  New World

Weak diversification

The 3 months correlation between Lend and New is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Lend Lease Group and New World Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New World Development and Lend Lease 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 Lend Lease Group are associated (or correlated) with New World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New World Development has no effect on the direction of Lend Lease i.e., Lend Lease and New World go up and down completely randomly.

Pair Corralation between Lend Lease and New World

Assuming the 90 days horizon Lend Lease is expected to generate 1.9 times less return on investment than New World. But when comparing it to its historical volatility, Lend Lease Group is 2.77 times less risky than New World. It trades about 0.04 of its potential returns per unit of risk. New World Development is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  38.00  in New World Development on December 19, 2024 and sell it today you would lose (3.00) from holding New World Development or give up 7.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Lend Lease Group  vs.  New World Development

Lend Lease Group

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lend Lease Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Lend Lease may actually be approaching a critical reversion point that can send shares even higher in April 2025.

New World Development

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in New World Development are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, New World showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lend Lease and New World

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

The idea behind Lend Lease Group and New World Development 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.