Correlation Between Stockland and British Land

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

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

Diversification Opportunities for Stockland and British Land

-0.07

Correlation Coefficient

Stockland  British Land

Good diversification

The 3 months correlation between Stockland and British is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Stockland and British Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British Land and Stockland 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 Stockland are associated (or correlated) with British Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British Land has no effect on the direction of Stockland i.e., Stockland and British Land go up and down completely randomly.

Pair Corralation between Stockland and British Land

Assuming the 90 days horizon Stockland is expected to under-perform the British Land. In addition to that, Stockland is 1.36 times more volatile than British Land. It trades about -0.07 of its total potential returns per unit of risk. British Land is currently generating about 0.21 per unit of volatility. If you would invest  458.00  in British Land on March 7, 2024 and sell it today you would earn a total of  105.00  from holding British Land or generate 22.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Stockland  vs.  British Land

Stockland

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stockland has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

British Land

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in British Land are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting fundamental indicators, British Land showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stockland and British Land

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

The idea behind Stockland and British Land 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 Global Correlations module to find global opportunities by holding instruments from different markets.