Correlation Between Shimano and Li Ning

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

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

Diversification Opportunities for Shimano and Li Ning

0.13

Correlation Coefficient

Shimano  Li Ning

Average diversification

The 3 months correlation between Shimano and LNNGY is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Shimano and Li Ning Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Ning and Shimano 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 Shimano 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 has no effect on the direction of Shimano i.e., Shimano and Li Ning go up and down completely randomly.

Pair Corralation between Shimano and Li Ning

Assuming the 90 days horizon Shimano is expected to under-perform the Li Ning. But the pink sheet apears to be less risky and, when comparing its historical volatility, Shimano is 2.54 times less risky than Li Ning. The pink sheet trades about -0.21 of its potential returns per unit of risk. The Li Ning Co is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  5,118  in Li Ning Co on December 4, 2024 and sell it today you would earn a total of  258.00  from holding Li Ning Co or generate 5.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Shimano  vs.  Li Ning Co

Shimano

Risk-Adjusted Performance

Very Weak

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

Li Ning

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Li Ning Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical and fundamental indicators, Li Ning may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Shimano and Li Ning

The main advantage of trading using opposite Shimano and Li Ning positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shimano 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 Shimano and Li Ning Co 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.