Correlation Between Pampa Energia and Lend Lease

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

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

Diversification Opportunities for Pampa Energia and Lend Lease

-0.35

Correlation Coefficient

Pampa Energia  Lend Lease

Very good diversification

The 3 months correlation between Pampa and Lend is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Pampa Energia SA and Lend Lease Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lend Lease Group and Pampa Energia 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 Pampa Energia SA are associated (or correlated) with Lend Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lend Lease Group has no effect on the direction of Pampa Energia i.e., Pampa Energia and Lend Lease go up and down completely randomly.

Pair Corralation between Pampa Energia and Lend Lease

Considering the 90-day investment horizon Pampa Energia SA is expected to generate 0.46 times more return on investment than Lend Lease. However, Pampa Energia SA is 2.19 times less risky than Lend Lease. It trades about 0.12 of its potential returns per unit of risk. Lend Lease Group is currently generating about -0.18 per unit of risk. If you would invest  8,786  in Pampa Energia SA on October 10, 2024 and sell it today you would earn a total of  482.00  from holding Pampa Energia SA or generate 5.49% return on investment over 90 days.

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

Pampa Energia SA  vs.  Lend Lease Group

Pampa Energia SA

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Pampa Energia SA are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Pampa Energia displayed solid returns over the last few months and may actually be approaching a breakup point.

Lend Lease Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lend Lease Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Pampa Energia and Lend Lease

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

The idea behind Pampa Energia SA and Lend Lease 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.

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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.