Correlation Between Legend Holdings and Lenovo Group
Can any of the company-specific risk be diversified away by investing in both Legend Holdings 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 Legend Holdings and Lenovo Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legend Holdings and Lenovo Group Limited, you can compare the effects of market volatilities on Legend Holdings 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 Legend Holdings with a short position of Lenovo Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legend Holdings and Lenovo Group.
Diversification Opportunities for Legend Holdings and Lenovo Group
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Legend and Lenovo is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Legend Holdings 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 Legend Holdings 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 Legend Holdings 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 Legend Holdings i.e., Legend Holdings and Lenovo Group go up and down completely randomly.
Pair Corralation between Legend Holdings and Lenovo Group
Assuming the 90 days horizon Legend Holdings is expected to generate 1.11 times less return on investment than Lenovo Group. In addition to that, Legend Holdings is 1.36 times more volatile than Lenovo Group Limited. It trades about 0.2 of its total potential returns per unit of risk. Lenovo Group Limited is currently generating about 0.3 per unit of volatility. If you would invest 2,240 in Lenovo Group Limited on December 1, 2024 and sell it today you would earn a total of 740.00 from holding Lenovo Group Limited or generate 33.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Legend Holdings vs. Lenovo Group Limited
Performance |
| Timeline |
| Legend Holdings |
| Lenovo Group Limited |
Legend Holdings and Lenovo Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legend Holdings and Lenovo Group
The main advantage of trading using opposite Legend Holdings and Lenovo Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legend Holdings 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.| Legend Holdings vs. Lenovo Group Limited | Legend Holdings vs. Lenovo Group Limited | Legend Holdings vs. Seiko Epson | Legend Holdings vs. Acer Incorporated |
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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