Correlation Between Dupont De and Lenovo Group

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

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

Diversification Opportunities for Dupont De and Lenovo Group

0.27

Correlation Coefficient

Dupont De  Lenovo Group

Modest diversification

The 3 months correlation between Dupont and Lenovo is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and Lenovo Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lenovo Group and Dupont De 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 Dupont De Nemours 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 Dupont De i.e., Dupont De and Lenovo Group go up and down completely randomly.

Pair Corralation between Dupont De and Lenovo Group

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to generate 0.54 times more return on investment than Lenovo Group. However, Dupont De Nemours is 1.86 times less risky than Lenovo Group. It trades about -0.11 of its potential returns per unit of risk. Lenovo Group Ltd is currently generating about -0.11 per unit of risk. If you would invest  7,594  in Dupont De Nemours on January 25, 2024 and sell it today you would lose (198.00) from holding Dupont De Nemours or give up 2.61% of portfolio value over 90 days.

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

Dupont De Nemours  vs.  Lenovo Group Ltd

Dupont De Nemours

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dupont De Nemours are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental indicators, Dupont De exhibited solid returns over the last few months and may actually be approaching a breakup point.

Lenovo Group

Risk-Adjusted Performance

0 of 100

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 uncertain 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 Dupont De and Lenovo Group

The main advantage of trading using opposite Dupont De and Lenovo Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De 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 Dupont De Nemours 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 CEOs Directory module to screen CEOs from public companies around the world.