Correlation Between Lenovo Group and Lenovo

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

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

Diversification Opportunities for Lenovo Group and Lenovo

0.95

Correlation Coefficient

Lenovo Group  Lenovo

Almost no diversification

The 3 months correlation between Lenovo and Lenovo is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Lenovo Group Ltd and Lenovo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lenovo Group 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 Ltd 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 Lenovo Group i.e., Lenovo Group and Lenovo go up and down completely randomly.

Pair Corralation between Lenovo Group and Lenovo

Assuming the 90 days horizon Lenovo Group Ltd is expected to generate 0.7 times more return on investment than Lenovo. However, Lenovo Group Ltd is 1.42 times less risky than Lenovo. It trades about -0.14 of its potential returns per unit of risk. Lenovo Group is currently generating about -0.14 per unit of risk. If you would invest  2,336  in Lenovo Group Ltd on January 26, 2024 and sell it today you would lose (143.00) from holding Lenovo Group Ltd or give up 6.12% of portfolio value over 90 days.

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

Lenovo Group Ltd  vs.  Lenovo Group

Lenovo Group

Risk-Adjusted Performance

0 of 100

Very 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 latest uncertain performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Lenovo Group and Lenovo

The main advantage of trading using opposite Lenovo Group and Lenovo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lenovo Group 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 Lenovo Group Ltd 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.