Correlation Between Lenovo Group and Seiko Epson
Can any of the company-specific risk be diversified away by investing in both Lenovo Group and Seiko Epson 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 Lenovo Group and Seiko Epson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lenovo Group Limited and Seiko Epson, you can compare the effects of market volatilities on Lenovo Group and Seiko Epson 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 Lenovo Group with a short position of Seiko Epson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lenovo Group and Seiko Epson.
Diversification Opportunities for Lenovo Group and Seiko Epson
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lenovo and Seiko is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Lenovo Group Limited and Seiko Epson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seiko Epson and Lenovo Group 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 Lenovo Group Limited are associated (or correlated) with Seiko Epson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seiko Epson has no effect on the direction of Lenovo Group i.e., Lenovo Group and Seiko Epson go up and down completely randomly.
Pair Corralation between Lenovo Group and Seiko Epson
Assuming the 90 days horizon Lenovo Group Limited is expected to generate 2.58 times more return on investment than Seiko Epson. However, Lenovo Group is 2.58 times more volatile than Seiko Epson. It trades about 0.0 of its potential returns per unit of risk. Seiko Epson is currently generating about -0.03 per unit of risk. If you would invest 112.00 in Lenovo Group Limited on September 1, 2024 and sell it today you would lose (1.00) from holding Lenovo Group Limited or give up 0.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Lenovo Group Limited vs. Seiko Epson
Performance |
| Timeline |
| Lenovo Group Limited |
| Seiko Epson |
Lenovo Group and Seiko Epson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lenovo Group and Seiko Epson
The main advantage of trading using opposite Lenovo Group and Seiko Epson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lenovo Group position performs unexpectedly, Seiko Epson 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 Seiko Epson will offset losses from the drop in Seiko Epson's long position.The idea behind Lenovo Group Limited and Seiko Epson 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.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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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