Correlation Between Impact Growth and LH Shopping

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

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

Diversification Opportunities for Impact Growth and LH Shopping

-0.5

Correlation Coefficient

Impact Growth  LH Shopping

Very good diversification

The 3 months correlation between Impact and LHSC is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Impact Growth REIT 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 Impact Growth 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 Impact Growth REIT 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 Impact Growth i.e., Impact Growth and LH Shopping go up and down completely randomly.

Pair Corralation between Impact Growth and LH Shopping

Assuming the 90 days trading horizon Impact Growth REIT is expected to generate 1.82 times more return on investment than LH Shopping. However, Impact Growth is 1.82 times more volatile than LH Shopping Centers. It trades about 0.08 of its potential returns per unit of risk. LH Shopping Centers is currently generating about -0.03 per unit of risk. If you would invest  1,079  in Impact Growth REIT on September 17, 2024 and sell it today you would earn a total of  21.00  from holding Impact Growth REIT or generate 1.95% return on investment over 90 days.

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

Impact Growth REIT  vs.  LH Shopping Centers

Impact Growth REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Impact Growth REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

LH Shopping Centers

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LH Shopping Centers are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, LH Shopping disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Impact Growth and LH Shopping

The main advantage of trading using opposite Impact Growth and LH Shopping positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Impact Growth 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 Impact Growth REIT 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.