Correlation Between ZhongAn Online and Li Ning

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

By analyzing existing cross correlation between ZhongAn Online P and Li Ning Company, you can compare the effects of market volatilities on ZhongAn Online and Li Ning 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 ZhongAn Online with a short position of Li Ning. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZhongAn Online and Li Ning.

Diversification Opportunities for ZhongAn Online and Li Ning

0.53

Correlation Coefficient

ZhongAn Online  Li Ning

Very weak diversification

The 3 months correlation between ZhongAn and LNLB is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding ZhongAn Online P and Li Ning Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Ning Company and ZhongAn Online 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 ZhongAn Online P are associated (or correlated) with Li Ning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Ning Company has no effect on the direction of ZhongAn Online i.e., ZhongAn Online and Li Ning go up and down completely randomly.

Pair Corralation between ZhongAn Online and Li Ning

Assuming the 90 days trading horizon ZhongAn Online P is expected to under-perform the Li Ning. In addition to that, ZhongAn Online is 1.27 times more volatile than Li Ning Company. It trades about -0.13 of its total potential returns per unit of risk. Li Ning Company is currently generating about -0.05 per unit of volatility. If you would invest  226.00  in Li Ning Company on October 4, 2024 and sell it today you would lose (30.00) from holding Li Ning Company or give up 13.27% of portfolio value over 90 days.

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

ZhongAn Online P  vs.  Li Ning Company

ZhongAn Online P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZhongAn Online P has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Li Ning Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Li Ning Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's essential 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 ZhongAn Online and Li Ning

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

The idea behind ZhongAn Online P and Li Ning Company 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.