Correlation Between Tesla and Lenovo Group

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

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

Diversification Opportunities for Tesla and Lenovo Group

0.19

Correlation Coefficient

Tesla  Lenovo Group

Average diversification

The 3 months correlation between Tesla and Lenovo is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Lenovo Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lenovo Group and Tesla 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 Tesla Inc 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 Tesla i.e., Tesla and Lenovo Group go up and down completely randomly.

Pair Corralation between Tesla and Lenovo Group

Given the investment horizon of 90 days Tesla Inc is expected to under-perform the Lenovo Group. In addition to that, Tesla is 1.37 times more volatile than Lenovo Group Ltd. It trades about -0.01 of its total potential returns per unit of risk. Lenovo Group Ltd is currently generating about 0.03 per unit of volatility. If you would invest  1,658  in Lenovo Group Ltd on January 25, 2024 and sell it today you would earn a total of  456.00  from holding Lenovo Group Ltd or generate 27.5% return on investment over 90 days.

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

Tesla Inc  vs.  Lenovo Group Ltd

Tesla Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tesla Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Lenovo Group

Risk-Adjusted Performance

0 of 100

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 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 May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Tesla and Lenovo Group

The main advantage of trading using opposite Tesla and Lenovo Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla 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 Tesla Inc 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 Stocks Directory module to find actively traded stocks across global markets.