Correlation Between Li Ning and USWE SPORTS
Can any of the company-specific risk be diversified away by investing in both Li Ning and USWE SPORTS 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 Li Ning and USWE SPORTS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Li Ning Company and USWE SPORTS AB, you can compare the effects of market volatilities on Li Ning and USWE SPORTS 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 Li Ning with a short position of USWE SPORTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Li Ning and USWE SPORTS.
Diversification Opportunities for Li Ning and USWE SPORTS
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between LNLB and USWE is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Li Ning Company and USWE SPORTS AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USWE SPORTS AB and Li Ning 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 Li Ning Company are associated (or correlated) with USWE SPORTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USWE SPORTS AB has no effect on the direction of Li Ning i.e., Li Ning and USWE SPORTS go up and down completely randomly.
Pair Corralation between Li Ning and USWE SPORTS
Assuming the 90 days trading horizon Li Ning is expected to generate 10.04 times less return on investment than USWE SPORTS. But when comparing it to its historical volatility, Li Ning Company is 1.51 times less risky than USWE SPORTS. It trades about 0.04 of its potential returns per unit of risk. USWE SPORTS AB is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 60.00 in USWE SPORTS AB on August 29, 2024 and sell it today you would earn a total of 16.00 from holding USWE SPORTS AB or generate 26.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Li Ning Company vs. USWE SPORTS AB
Performance |
| Timeline |
| Li Ning Company |
| USWE SPORTS AB |
Li Ning and USWE SPORTS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Li Ning and USWE SPORTS
The main advantage of trading using opposite Li Ning and USWE SPORTS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Li Ning position performs unexpectedly, USWE SPORTS 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 USWE SPORTS will offset losses from the drop in USWE SPORTS's long position.| Li Ning vs. Superior Plus Corp | Li Ning vs. NMI Holdings | Li Ning vs. SIVERS SEMICONDUCTORS AB | Li Ning vs. Talanx AG |
| USWE SPORTS vs. Li Ning Company | USWE SPORTS vs. Superior Plus Corp | USWE SPORTS vs. NMI Holdings | USWE SPORTS vs. SIVERS SEMICONDUCTORS AB |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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