Correlation Between Lenovo and Logitech International

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

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

Diversification Opportunities for Lenovo and Logitech International

0.57

Correlation Coefficient

Lenovo  Logitech International

Very weak diversification

The 3 months correlation between Lenovo and Logitech is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Lenovo Group and Logitech International SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Logitech International and Lenovo 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 Lenovo Group are associated (or correlated) with Logitech International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Logitech International has no effect on the direction of Lenovo i.e., Lenovo and Logitech International go up and down completely randomly.

Pair Corralation between Lenovo and Logitech International

Assuming the 90 days horizon Lenovo Group is expected to generate 1.44 times more return on investment than Logitech International. However, Lenovo is 1.44 times more volatile than Logitech International SA. It trades about -0.12 of its potential returns per unit of risk. Logitech International SA is currently generating about -0.33 per unit of risk. If you would invest  115.00  in Lenovo Group on January 25, 2024 and sell it today you would lose (9.00) from holding Lenovo Group or give up 7.83% of portfolio value over 90 days.

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

Lenovo Group  vs.  Logitech International SA

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 uncertain 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.

Logitech International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Logitech International SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Lenovo and Logitech International

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

The idea behind Lenovo Group and Logitech International SA 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.