Correlation Between LTC Properties and Hannon Armstrong

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

By analyzing existing cross correlation between LTC Properties and Hannon Armstrong Sustainable, you can compare the effects of market volatilities on LTC Properties and Hannon Armstrong 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 LTC Properties with a short position of Hannon Armstrong. Check out your portfolio center. Please also check ongoing floating volatility patterns of LTC Properties and Hannon Armstrong.

Diversification Opportunities for LTC Properties and Hannon Armstrong

0.75

Correlation Coefficient

LTC Properties  Hannon Armstrong

Poor diversification

The 3 months correlation between LTC and Hannon is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding LTC Properties and Hannon Armstrong Sustainable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hannon Armstrong Sus and LTC Properties 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 LTC Properties are associated (or correlated) with Hannon Armstrong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hannon Armstrong Sus has no effect on the direction of LTC Properties i.e., LTC Properties and Hannon Armstrong go up and down completely randomly.

Pair Corralation between LTC Properties and Hannon Armstrong

Considering the 90-day investment horizon LTC Properties is expected to under-perform the Hannon Armstrong. But the stock apears to be less risky and, when comparing its historical volatility, LTC Properties is 1.61 times less risky than Hannon Armstrong. The stock trades about -0.1 of its potential returns per unit of risk. The Hannon Armstrong Sustainable is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  3,067  in Hannon Armstrong Sustainable on December 1, 2024 and sell it today you would lose (194.00) from holding Hannon Armstrong Sustainable or give up 6.33% of portfolio value over 90 days.

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

LTC Properties  vs.  Hannon Armstrong Sustainable

LTC Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days LTC Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Hannon Armstrong Sus

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hannon Armstrong Sustainable has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Hannon Armstrong is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with LTC Properties and Hannon Armstrong

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

The idea behind LTC Properties and Hannon Armstrong Sustainable 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.