Correlation Between China Aircraft and Lend Lease

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

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

Diversification Opportunities for China Aircraft and Lend Lease

0.37

Correlation Coefficient

China Aircraft  Lend Lease

Weak diversification

The 3 months correlation between China and Lend is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding China Aircraft Leasing 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 China Aircraft 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 China Aircraft Leasing 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 China Aircraft i.e., China Aircraft and Lend Lease go up and down completely randomly.

Pair Corralation between China Aircraft and Lend Lease

Assuming the 90 days horizon China Aircraft Leasing is expected to generate 1.42 times more return on investment than Lend Lease. However, China Aircraft is 1.42 times more volatile than Lend Lease Group. It trades about 0.07 of its potential returns per unit of risk. Lend Lease Group is currently generating about -0.02 per unit of risk. If you would invest  12.00  in China Aircraft Leasing on January 26, 2024 and sell it today you would earn a total of  31.00  from holding China Aircraft Leasing or generate 258.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

China Aircraft Leasing  vs.  Lend Lease Group

China Aircraft Leasing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Aircraft Leasing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, China Aircraft is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

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 weak 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 China Aircraft and Lend Lease

The main advantage of trading using opposite China Aircraft and Lend Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Aircraft 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 China Aircraft Leasing 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.