Correlation Between Casio Computer and Li Ning

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

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

Diversification Opportunities for Casio Computer and Li Ning

0.33

Correlation Coefficient

Casio Computer  Li Ning

Weak diversification

The 3 months correlation between Casio and LNLB is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Casio Computer CoLtd 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 Casio Computer 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 Casio Computer CoLtd 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 Casio Computer i.e., Casio Computer and Li Ning go up and down completely randomly.

Pair Corralation between Casio Computer and Li Ning

Assuming the 90 days trading horizon Casio Computer CoLtd is expected to generate 0.53 times more return on investment than Li Ning. However, Casio Computer CoLtd is 1.87 times less risky than Li Ning. It trades about -0.07 of its potential returns per unit of risk. Li Ning Company is currently generating about -0.12 per unit of risk. If you would invest  787.00  in Casio Computer CoLtd on October 22, 2024 and sell it today you would lose (14.00) from holding Casio Computer CoLtd or give up 1.78% of portfolio value over 90 days.

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

Casio Computer CoLtd  vs.  Li Ning Company

Casio Computer CoLtd

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Casio Computer CoLtd are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Casio Computer may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Li Ning Company

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Li Ning Company are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Li Ning is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Casio Computer and Li Ning

The main advantage of trading using opposite Casio Computer and Li Ning positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Casio Computer 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 Casio Computer CoLtd 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.