Correlation Between Booking Holdings and Li Ning
Can any of the company-specific risk be diversified away by investing in both Booking Holdings 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 Booking Holdings and Li Ning into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Booking Holdings and Li Ning Company, you can compare the effects of market volatilities on Booking Holdings 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 Booking Holdings with a short position of Li Ning. Check out your portfolio center. Please also check ongoing floating volatility patterns of Booking Holdings and Li Ning.
Diversification Opportunities for Booking Holdings and Li Ning
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Booking and LNLB is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Booking Holdings 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 Booking 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 Booking Holdings 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 Booking Holdings i.e., Booking Holdings and Li Ning go up and down completely randomly.
Pair Corralation between Booking Holdings and Li Ning
Assuming the 90 days trading horizon Booking Holdings is expected to generate 0.58 times more return on investment than Li Ning. However, Booking Holdings is 1.72 times less risky than Li Ning. It trades about 0.36 of its potential returns per unit of risk. Li Ning Company is currently generating about 0.05 per unit of risk. If you would invest 429,700 in Booking Holdings on September 2, 2024 and sell it today you would earn a total of 63,000 from holding Booking Holdings or generate 14.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Booking Holdings vs. Li Ning Company
Performance |
| Timeline |
| Booking Holdings |
| Li Ning Company |
Booking Holdings and Li Ning Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Booking Holdings and Li Ning
The main advantage of trading using opposite Booking Holdings and Li Ning positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Booking Holdings 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.| Booking Holdings vs. SOFI TECHNOLOGIES | Booking Holdings vs. AAC TECHNOLOGHLDGADR | Booking Holdings vs. Taiwan Semiconductor Manufacturing | Booking Holdings vs. Digilife Technologies Limited |
| Li Ning vs. Global Ship Lease | Li Ning vs. Perseus Mining Limited | Li Ning vs. Playtech plc | Li Ning vs. Uber Technologies |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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