Correlation Between NC Housing and Lalin Property

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

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

Diversification Opportunities for NC Housing and Lalin Property

0.93

Correlation Coefficient

NC Housing  Lalin Property

Almost no diversification

The 3 months correlation between NCH and Lalin is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding NC Housing Public and Lalin Property Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lalin Property Public and NC Housing 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 NC Housing Public are associated (or correlated) with Lalin Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lalin Property Public has no effect on the direction of NC Housing i.e., NC Housing and Lalin Property go up and down completely randomly.

Pair Corralation between NC Housing and Lalin Property

Assuming the 90 days trading horizon NC Housing Public is expected to generate 78.58 times more return on investment than Lalin Property. However, NC Housing is 78.58 times more volatile than Lalin Property Public. It trades about 0.06 of its potential returns per unit of risk. Lalin Property Public is currently generating about -0.11 per unit of risk. If you would invest  98.00  in NC Housing Public on September 24, 2024 and sell it today you would lose (27.00) from holding NC Housing Public or give up 27.55% of portfolio value over 90 days.

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

NC Housing Public  vs.  Lalin Property Public

NC Housing Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NC Housing Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's technical indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Lalin Property Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lalin Property Public 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.

Pair Trading with NC Housing and Lalin Property

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

The idea behind NC Housing Public and Lalin Property Public 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.