Correlation Between CBRE Group and Henderson Land

Can any of the company-specific risk be diversified away by investing in both CBRE Group and Henderson Land 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 CBRE Group and Henderson Land into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CBRE Group Class and Henderson Land Development, you can compare the effects of market volatilities on CBRE Group and Henderson Land 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 CBRE Group with a short position of Henderson Land. Check out your portfolio center. Please also check ongoing floating volatility patterns of CBRE Group and Henderson Land.

Diversification Opportunities for CBRE Group and Henderson Land

0.59

Correlation Coefficient

CBRE Group  Henderson Land

Very weak diversification

The 3 months correlation between CBRE and Henderson is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding CBRE Group Class and Henderson Land Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henderson Land Devel and CBRE Group 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 CBRE Group Class are associated (or correlated) with Henderson Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henderson Land Devel has no effect on the direction of CBRE Group i.e., CBRE Group and Henderson Land go up and down completely randomly.

Pair Corralation between CBRE Group and Henderson Land

Given the investment horizon of 90 days CBRE Group Class is expected to under-perform the Henderson Land. But the stock apears to be less risky and, when comparing its historical volatility, CBRE Group Class is 1.1 times less risky than Henderson Land. The stock trades about -0.28 of its potential returns per unit of risk. The Henderson Land Development is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  297.00  in Henderson Land Development on January 24, 2024 and sell it today you would earn a total of  3.00  from holding Henderson Land Development or generate 1.01% return on investment over 90 days.

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

CBRE Group Class  vs.  Henderson Land Development

CBRE Group Class

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CBRE Group Class are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, CBRE Group is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Henderson Land Devel

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Henderson Land Development are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, Henderson Land may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with CBRE Group and Henderson Land

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

The idea behind CBRE Group Class and Henderson Land Development 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.