Correlation Between Peloton Interactive and Li Ning
Can any of the company-specific risk be diversified away by investing in both Peloton Interactive 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 Peloton Interactive and Li Ning into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Peloton Interactive and Li Ning Company, you can compare the effects of market volatilities on Peloton Interactive 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 Peloton Interactive with a short position of Li Ning. Check out your portfolio center. Please also check ongoing floating volatility patterns of Peloton Interactive and Li Ning.
Diversification Opportunities for Peloton Interactive and Li Ning
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Peloton and LNLB is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Peloton Interactive and Li Ning Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Ning Company and Peloton Interactive 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 Peloton Interactive 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 Company has no effect on the direction of Peloton Interactive i.e., Peloton Interactive and Li Ning go up and down completely randomly.
Pair Corralation between Peloton Interactive and Li Ning
Assuming the 90 days horizon Peloton Interactive is expected to generate 1.38 times more return on investment than Li Ning. However, Peloton Interactive is 1.38 times more volatile than Li Ning Company. It trades about 0.06 of its potential returns per unit of risk. Li Ning Company is currently generating about -0.01 per unit of risk. If you would invest 499.00 in Peloton Interactive on September 3, 2024 and sell it today you would earn a total of 440.00 from holding Peloton Interactive or generate 88.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Peloton Interactive vs. Li Ning Company
Performance |
| Timeline |
| Peloton Interactive |
| Li Ning Company |
Peloton Interactive and Li Ning Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Peloton Interactive and Li Ning
The main advantage of trading using opposite Peloton Interactive and Li Ning positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Peloton Interactive 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.| Peloton Interactive vs. Arrow Electronics | Peloton Interactive vs. Meiko Electronics Co | Peloton Interactive vs. Treasury Wine Estates | Peloton Interactive vs. ARROW ELECTRONICS |
| Li Ning vs. Sunstone Hotel Investors | Li Ning vs. Park Hotels Resorts | Li Ning vs. British American Tobacco | Li Ning vs. IMPERIAL TOBACCO |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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