Correlation Between Quality Houses and LH Shopping

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

By analyzing existing cross correlation between Quality Houses Property and LH Shopping Centers, you can compare the effects of market volatilities on Quality Houses and LH Shopping 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 Quality Houses with a short position of LH Shopping. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quality Houses and LH Shopping.

Diversification Opportunities for Quality Houses and LH Shopping

-0.61

Correlation Coefficient

Quality Houses  LH Shopping

Excellent diversification

The 3 months correlation between Quality and LHSC is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Quality Houses Property and LH Shopping Centers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LH Shopping Centers and Quality Houses 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 Quality Houses Property are associated (or correlated) with LH Shopping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LH Shopping Centers has no effect on the direction of Quality Houses i.e., Quality Houses and LH Shopping go up and down completely randomly.

Pair Corralation between Quality Houses and LH Shopping

Assuming the 90 days trading horizon Quality Houses Property is expected to under-perform the LH Shopping. In addition to that, Quality Houses is 22.58 times more volatile than LH Shopping Centers. It trades about -0.17 of its total potential returns per unit of risk. LH Shopping Centers is currently generating about 0.1 per unit of volatility. If you would invest  1,110  in LH Shopping Centers on November 23, 2024 and sell it today you would earn a total of  30.00  from holding LH Shopping Centers or generate 2.7% return on investment over 90 days.

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

Quality Houses Property  vs.  LH Shopping Centers

Quality Houses Property

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quality Houses Property has generated negative risk-adjusted returns adding no value to fund investors. Despite weak performance in the last few months, the Fund's forward-looking signals remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the fund institutional investors.

LH Shopping Centers

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LH Shopping Centers are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, LH Shopping is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Quality Houses and LH Shopping

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

The idea behind Quality Houses Property and LH Shopping Centers 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.