Correlation Between Plug Power and Lenovo Group

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

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

Diversification Opportunities for Plug Power and Lenovo Group

-0.07

Correlation Coefficient

Plug Power  Lenovo Group

Good diversification

The 3 months correlation between Plug and Lenovo is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Plug Power and Lenovo Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lenovo Group and Plug Power 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 Plug Power 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 Plug Power i.e., Plug Power and Lenovo Group go up and down completely randomly.

Pair Corralation between Plug Power and Lenovo Group

Given the investment horizon of 90 days Plug Power is expected to under-perform the Lenovo Group. In addition to that, Plug Power is 2.21 times more volatile than Lenovo Group Ltd. It trades about -0.07 of its total potential returns per unit of risk. Lenovo Group Ltd is currently generating about -0.04 per unit of volatility. If you would invest  2,388  in Lenovo Group Ltd on January 26, 2024 and sell it today you would lose (195.00) from holding Lenovo Group Ltd or give up 8.17% of portfolio value over 90 days.

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

Plug Power  vs.  Lenovo Group Ltd

Plug Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Plug Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic 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.

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 weak 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.

Pair Trading with Plug Power and Lenovo Group

The main advantage of trading using opposite Plug Power and Lenovo Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plug Power 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 Plug Power 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.