Correlation Between Prosiebensat and Lenovo Group

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

By analyzing existing cross correlation between Prosiebensat 1 Media and Lenovo Group Limited, you can compare the effects of market volatilities on Prosiebensat and Lenovo Group 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 Prosiebensat with a short position of Lenovo Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosiebensat and Lenovo Group.

Diversification Opportunities for Prosiebensat and Lenovo Group

0.77

Correlation Coefficient

Prosiebensat  Lenovo Group

Poor diversification

The 3 months correlation between Prosiebensat and Lenovo is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Prosiebensat 1 Media and Lenovo Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lenovo Group Limited and Prosiebensat 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 Prosiebensat 1 Media are associated (or correlated) with Lenovo Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lenovo Group Limited has no effect on the direction of Prosiebensat i.e., Prosiebensat and Lenovo Group go up and down completely randomly.

Pair Corralation between Prosiebensat and Lenovo Group

Assuming the 90 days trading horizon Prosiebensat 1 Media is expected to generate 0.97 times more return on investment than Lenovo Group. However, Prosiebensat 1 Media is 1.03 times less risky than Lenovo Group. It trades about 0.16 of its potential returns per unit of risk. Lenovo Group Limited is currently generating about 0.1 per unit of risk. If you would invest  471.00  in Prosiebensat 1 Media on October 4, 2024 and sell it today you would earn a total of  48.00  from holding Prosiebensat 1 Media or generate 10.19% return on investment over 90 days.

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

Prosiebensat 1 Media  vs.  Lenovo Group Limited

Prosiebensat 1 Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prosiebensat 1 Media has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 comparatively stable basic indicators, Lenovo Group is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Prosiebensat and Lenovo Group

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

The idea behind Prosiebensat 1 Media and Lenovo Group Limited 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.