Correlation Between Li Ning and SOEDER SPORTFISKE

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

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

Diversification Opportunities for Li Ning and SOEDER SPORTFISKE

-0.29

Correlation Coefficient

Li Ning  SOEDER SPORTFISKE

Very good diversification

The 3 months correlation between LNLB and SOEDER is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Li Ning Company and SOEDER SPORTFISKE AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOEDER SPORTFISKE and Li Ning 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 Li Ning Company are associated (or correlated) with SOEDER SPORTFISKE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOEDER SPORTFISKE has no effect on the direction of Li Ning i.e., Li Ning and SOEDER SPORTFISKE go up and down completely randomly.

Pair Corralation between Li Ning and SOEDER SPORTFISKE

Assuming the 90 days trading horizon Li Ning Company is expected to under-perform the SOEDER SPORTFISKE. In addition to that, Li Ning is 1.26 times more volatile than SOEDER SPORTFISKE AB. It trades about -0.04 of its total potential returns per unit of risk. SOEDER SPORTFISKE AB is currently generating about -0.02 per unit of volatility. If you would invest  224.00  in SOEDER SPORTFISKE AB on October 8, 2024 and sell it today you would lose (9.00) from holding SOEDER SPORTFISKE AB or give up 4.02% of portfolio value over 90 days.

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

Li Ning Company  vs.  SOEDER SPORTFISKE AB

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.

SOEDER SPORTFISKE

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Li Ning and SOEDER SPORTFISKE

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

The idea behind Li Ning Company and SOEDER SPORTFISKE AB 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.