Correlation Between COSTCO WHOLESALE and Lenovo Group
Can any of the company-specific risk be diversified away by investing in both COSTCO WHOLESALE 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 COSTCO WHOLESALE and Lenovo Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between COSTCO WHOLESALE CDR and Lenovo Group Limited, you can compare the effects of market volatilities on COSTCO WHOLESALE 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 COSTCO WHOLESALE with a short position of Lenovo Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of COSTCO WHOLESALE and Lenovo Group.
Diversification Opportunities for COSTCO WHOLESALE and Lenovo Group
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between COSTCO and Lenovo is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding COSTCO WHOLESALE CDR 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 COSTCO WHOLESALE 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 COSTCO WHOLESALE CDR 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 COSTCO WHOLESALE i.e., COSTCO WHOLESALE and Lenovo Group go up and down completely randomly.
Pair Corralation between COSTCO WHOLESALE and Lenovo Group
Assuming the 90 days trading horizon COSTCO WHOLESALE CDR is expected to generate 0.69 times more return on investment than Lenovo Group. However, COSTCO WHOLESALE CDR is 1.46 times less risky than Lenovo Group. It trades about 0.2 of its potential returns per unit of risk. Lenovo Group Limited is currently generating about -0.04 per unit of risk. If you would invest 2,880 in COSTCO WHOLESALE CDR on September 14, 2024 and sell it today you would earn a total of 200.00 from holding COSTCO WHOLESALE CDR or generate 6.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
COSTCO WHOLESALE CDR vs. Lenovo Group Limited
Performance |
| Timeline |
| COSTCO WHOLESALE CDR |
| Lenovo Group Limited |
COSTCO WHOLESALE and Lenovo Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with COSTCO WHOLESALE and Lenovo Group
The main advantage of trading using opposite COSTCO WHOLESALE and Lenovo Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COSTCO WHOLESALE 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.| COSTCO WHOLESALE vs. Walmart | COSTCO WHOLESALE vs. Costco Wholesale | COSTCO WHOLESALE vs. Dollarama | COSTCO WHOLESALE vs. Superior Plus Corp |
| Lenovo Group vs. United Airlines Holdings | Lenovo Group vs. CHINA TONTINE WINES | Lenovo Group vs. ITALIAN WINE BRANDS | Lenovo Group vs. Treasury Wine Estates |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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