Correlation Between Alta Equipment and Lend Lease

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

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

Diversification Opportunities for Alta Equipment and Lend Lease

-0.33

Correlation Coefficient

Alta Equipment  Lend Lease

Very good diversification

The 3 months correlation between Alta and Lend is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Alta Equipment Group 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 Alta Equipment 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 Alta Equipment Group 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 Alta Equipment i.e., Alta Equipment and Lend Lease go up and down completely randomly.

Pair Corralation between Alta Equipment and Lend Lease

Given the investment horizon of 90 days Alta Equipment Group is expected to under-perform the Lend Lease. But the stock apears to be less risky and, when comparing its historical volatility, Alta Equipment Group is 1.68 times less risky than Lend Lease. The stock trades about -0.14 of its potential returns per unit of risk. The Lend Lease Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  422.00  in Lend Lease Group on January 25, 2024 and sell it today you would lose (1.00) from holding Lend Lease Group or give up 0.24% of portfolio value over 90 days.

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

Alta Equipment Group  vs.  Lend Lease Group

Alta Equipment Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alta Equipment Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Alta Equipment may actually be approaching a critical reversion point that can send shares even higher in May 2024.

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 latest inconsistent 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.

Pair Trading with Alta Equipment and Lend Lease

The main advantage of trading using opposite Alta Equipment and Lend Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alta Equipment 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 Alta Equipment Group 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.