Correlation Between Lenovo Group and ITALIAN WINE

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

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

Diversification Opportunities for Lenovo Group and ITALIAN WINE

-0.04

Correlation Coefficient

Lenovo Group  ITALIAN WINE

Good diversification

The 3 months correlation between Lenovo and ITALIAN is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Lenovo Group Limited and ITALIAN WINE BRANDS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITALIAN WINE BRANDS and Lenovo Group 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 Lenovo Group Limited are associated (or correlated) with ITALIAN WINE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITALIAN WINE BRANDS has no effect on the direction of Lenovo Group i.e., Lenovo Group and ITALIAN WINE go up and down completely randomly.

Pair Corralation between Lenovo Group and ITALIAN WINE

Assuming the 90 days trading horizon Lenovo Group Limited is expected to generate 1.4 times more return on investment than ITALIAN WINE. However, Lenovo Group is 1.4 times more volatile than ITALIAN WINE BRANDS. It trades about 0.06 of its potential returns per unit of risk. ITALIAN WINE BRANDS is currently generating about -0.01 per unit of risk. If you would invest  1,308  in Lenovo Group Limited on October 5, 2024 and sell it today you would earn a total of  1,112  from holding Lenovo Group Limited or generate 85.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Lenovo Group Limited  vs.  ITALIAN WINE BRANDS

Lenovo Group Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lenovo Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

ITALIAN WINE BRANDS

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days ITALIAN WINE BRANDS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ITALIAN WINE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lenovo Group and ITALIAN WINE

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

The idea behind Lenovo Group Limited and ITALIAN WINE BRANDS 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.