Correlation Between Arweave and Lenovo Group

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

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

Diversification Opportunities for Arweave and Lenovo Group

0.24

Correlation Coefficient

Arweave  Lenovo Group

Modest diversification

The 3 months correlation between Arweave and Lenovo is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Arweave and Lenovo Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lenovo Group and Arweave 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 Arweave are associated (or correlated) with Lenovo Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lenovo Group has no effect on the direction of Arweave i.e., Arweave and Lenovo Group go up and down completely randomly.

Pair Corralation between Arweave and Lenovo Group

Assuming the 90 days horizon Arweave is expected to generate 3.8 times more return on investment than Lenovo Group. However, Arweave is 3.8 times more volatile than Lenovo Group Ltd. It trades about 0.21 of its potential returns per unit of risk. Lenovo Group Ltd is currently generating about -0.1 per unit of risk. If you would invest  849.00  in Arweave on January 20, 2024 and sell it today you would earn a total of  1,676  from holding Arweave or generate 197.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

Arweave  vs.  Lenovo Group Ltd

Arweave

Risk-Adjusted Performance

16 of 100

Solid

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

Lenovo Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lenovo Group Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Arweave and Lenovo Group

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

The idea behind Arweave and Lenovo Group Ltd 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.