Correlation Between KPN Property and LH Shopping

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

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

Diversification Opportunities for KPN Property and LH Shopping

0.13

Correlation Coefficient

KPN Property  LH Shopping

Average diversification

The 3 months correlation between KPN and LHSC is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding KPN Property 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 KPN Property 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 KPN Property 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 KPN Property i.e., KPN Property and LH Shopping go up and down completely randomly.

Pair Corralation between KPN Property and LH Shopping

Assuming the 90 days trading horizon KPN Property is expected to generate 70.24 times more return on investment than LH Shopping. However, KPN Property is 70.24 times more volatile than LH Shopping Centers. It trades about 0.07 of its potential returns per unit of risk. LH Shopping Centers is currently generating about 0.14 per unit of risk. If you would invest  264.00  in KPN Property on September 29, 2024 and sell it today you would lose (264.00) from holding KPN Property or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.19%
Values	Daily Returns

KPN Property  vs.  LH Shopping Centers

KPN Property

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KPN Property has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

LH Shopping Centers

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LH Shopping Centers are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, LH Shopping is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with KPN Property and LH Shopping

The main advantage of trading using opposite KPN Property and LH Shopping positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KPN Property 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 KPN Property 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.