Correlation Between Pure Storage and Li Ning

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

Diversification Opportunities for Pure Storage and Li Ning

-0.04
  Correlation Coefficient

Good diversification

The 3 months correlation between Pure and LNLB is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Pure Storage 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 Pure Storage 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 Pure Storage 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 Pure Storage i.e., Pure Storage and Li Ning go up and down completely randomly.

Pair Corralation between Pure Storage and Li Ning

Assuming the 90 days horizon Pure Storage is expected to generate 1.39 times more return on investment than Li Ning. However, Pure Storage is 1.39 times more volatile than Li Ning Company. It trades about 0.13 of its potential returns per unit of risk. Li Ning Company is currently generating about -0.04 per unit of risk. If you would invest  4,684  in Pure Storage on October 8, 2024 and sell it today you would earn a total of  1,408  from holding Pure Storage or generate 30.06% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Pure Storage  vs.  Li Ning Company

 Performance 
       Timeline  
Pure Storage 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Pure Storage are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Pure Storage reported solid returns over the last few months and may actually be approaching a breakup point.
Li Ning Company 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.

Pure Storage and Li Ning Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pure Storage and Li Ning

The main advantage of trading using opposite Pure Storage and Li Ning positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pure Storage 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 Pure Storage 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.
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 Commodity Directory module to find actively traded commodities issued by global exchanges.

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