Correlation Between Li Ning and SHIMANO INC

Can any of the company-specific risk be diversified away by investing in both Li Ning and SHIMANO INC 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 SHIMANO INC 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 SHIMANO INC UNSPADR10, you can compare the effects of market volatilities on Li Ning and SHIMANO INC 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 SHIMANO INC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Li Ning and SHIMANO INC.

Diversification Opportunities for Li Ning and SHIMANO INC

0.44

Correlation Coefficient

Li Ning  SHIMANO INC

Very weak diversification

The 3 months correlation between LNLB and SHIMANO is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Li Ning Company and SHIMANO INC UNSPADR10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHIMANO INC UNSPADR10 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 SHIMANO INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHIMANO INC UNSPADR10 has no effect on the direction of Li Ning i.e., Li Ning and SHIMANO INC go up and down completely randomly.

Pair Corralation between Li Ning and SHIMANO INC

Assuming the 90 days trading horizon Li Ning is expected to generate 1.38 times less return on investment than SHIMANO INC. In addition to that, Li Ning is 1.28 times more volatile than SHIMANO INC UNSPADR10. It trades about 0.03 of its total potential returns per unit of risk. SHIMANO INC UNSPADR10 is currently generating about 0.05 per unit of volatility. If you would invest  1,260  in SHIMANO INC UNSPADR10 on December 30, 2024 and sell it today you would earn a total of  70.00  from holding SHIMANO INC UNSPADR10 or generate 5.56% return on investment over 90 days.

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

Li Ning Company  vs.  SHIMANO INC UNSPADR10

Li Ning Company

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Li Ning Company are ranked lower than 2 (%) 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.

SHIMANO INC UNSPADR10

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SHIMANO INC UNSPADR10 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain primary indicators, SHIMANO INC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Li Ning and SHIMANO INC

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

The idea behind Li Ning Company and SHIMANO INC UNSPADR10 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.