Correlation Between Lenovo Group and Canon

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

Diversification Opportunities for Lenovo Group and Canon

-0.47
  Correlation Coefficient

Very good diversification

The 3 months correlation between Lenovo and Canon is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Lenovo Group Ltd and Canon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canon Inc and Lenovo Group 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 Canon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canon Inc has no effect on the direction of Lenovo Group i.e., Lenovo Group and Canon go up and down completely randomly.

Pair Corralation between Lenovo Group and Canon

Assuming the 90 days horizon Lenovo Group is expected to generate 1.32 times less return on investment than Canon. In addition to that, Lenovo Group is 3.33 times more volatile than Canon Inc. It trades about 0.03 of its total potential returns per unit of risk. Canon Inc is currently generating about 0.15 per unit of volatility. If you would invest  2,919  in Canon Inc on December 29, 2023 and sell it today you would earn a total of  81.00  from holding Canon Inc or generate 2.77% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Lenovo Group Ltd  vs.  Canon Inc

 Performance 
       Timeline  
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.
Canon Inc 

Risk-Adjusted Performance

15 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Canon Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Canon reported solid returns over the last few months and may actually be approaching a breakup point.

Lenovo Group and Canon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lenovo Group and Canon

The main advantage of trading using opposite Lenovo Group and Canon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lenovo Group position performs unexpectedly, Canon 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 Canon will offset losses from the drop in Canon's long position.
The idea behind Lenovo Group and Canon Inc 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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