Correlation Between Lend Lease and HE Equipment

Can any of the company-specific risk be diversified away by investing in both Lend Lease and HE Equipment 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 HE Equipment 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 HE Equipment Services, you can compare the effects of market volatilities on Lend Lease and HE Equipment 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 HE Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lend Lease and HE Equipment.

Diversification Opportunities for Lend Lease and HE Equipment

-0.5

Correlation Coefficient

Lend Lease  HE Equipment

Very good diversification

The 3 months correlation between Lend and HEES is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Lend Lease Group and HE Equipment Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HE Equipment Services 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 HE Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HE Equipment Services has no effect on the direction of Lend Lease i.e., Lend Lease and HE Equipment go up and down completely randomly.

Pair Corralation between Lend Lease and HE Equipment

Assuming the 90 days horizon Lend Lease Group is expected to generate 0.15 times more return on investment than HE Equipment. However, Lend Lease Group is 6.54 times less risky than HE Equipment. It trades about 0.21 of its potential returns per unit of risk. HE Equipment Services is currently generating about -0.27 per unit of risk. If you would invest  407.00  in Lend Lease Group on February 4, 2024 and sell it today you would earn a total of  13.00  from holding Lend Lease Group or generate 3.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Lend Lease Group  vs.  HE Equipment Services

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. Despite latest inconsistent performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

HE Equipment Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HE Equipment Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Lend Lease and HE Equipment

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

The idea behind Lend Lease Group and HE Equipment Services 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.