Correlation Between Dell Technologies and Lenovo Group

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Can any of the company-specific risk be diversified away by investing in both Dell Technologies 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 Dell Technologies and Lenovo Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dell Technologies and Lenovo Group, you can compare the effects of market volatilities on Dell Technologies 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 Dell Technologies with a short position of Lenovo Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dell Technologies and Lenovo Group.

Diversification Opportunities for Dell Technologies and Lenovo Group

-0.15
  Correlation Coefficient

Good diversification

The 3 months correlation between Dell and Lenovo is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Dell Technologies and Lenovo Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lenovo Group and Dell Technologies 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 Dell Technologies 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 Dell Technologies i.e., Dell Technologies and Lenovo Group go up and down completely randomly.

Pair Corralation between Dell Technologies and Lenovo Group

Given the investment horizon of 90 days Dell Technologies is expected to generate 2.79 times more return on investment than Lenovo Group. However, Dell Technologies is 2.79 times more volatile than Lenovo Group. It trades about 0.16 of its potential returns per unit of risk. Lenovo Group is currently generating about 0.11 per unit of risk. If you would invest  9,325  in Dell Technologies on December 30, 2023 and sell it today you would earn a total of  2,086  from holding Dell Technologies or generate 22.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Dell Technologies  vs.  Lenovo Group Ltd

 Performance 
       Timeline  
Dell Technologies 

Risk-Adjusted Performance

13 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Dell Technologies are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Dell Technologies disclosed solid returns over the last few months and may actually be approaching a breakup point.
Lenovo Group 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Lenovo Group 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 April 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Dell Technologies and Lenovo Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dell Technologies and Lenovo Group

The main advantage of trading using opposite Dell Technologies and Lenovo Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dell Technologies 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 Dell Technologies 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.
Check out your portfolio center.
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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