Correlation Between Canon and Lenovo

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

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

Diversification Opportunities for Canon and Lenovo

-0.56

Correlation Coefficient

Canon  Lenovo

Excellent diversification

The 3 months correlation between Canon and Lenovo is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Canon Inc ADR and Lenovo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lenovo Group and Canon 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 Canon Inc ADR are associated (or correlated) with Lenovo. 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 Canon i.e., Canon and Lenovo go up and down completely randomly.

Pair Corralation between Canon and Lenovo

If you would invest  2,190  in Canon Inc ADR on January 25, 2024 and sell it today you would earn a total of  0.00  from holding Canon Inc ADR or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.55%
Values	Daily Returns

Canon Inc ADR  vs.  Lenovo Group

Canon Inc ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canon Inc ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Canon is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Lenovo Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Canon and Lenovo

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

The idea behind Canon Inc ADR and Lenovo 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.