Correlation Between SCANSOURCE and Lenovo Group
Can any of the company-specific risk be diversified away by investing in both SCANSOURCE 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 SCANSOURCE and Lenovo Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SCANSOURCE and Lenovo Group Limited, you can compare the effects of market volatilities on SCANSOURCE 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 SCANSOURCE with a short position of Lenovo Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCANSOURCE and Lenovo Group.
Diversification Opportunities for SCANSOURCE and Lenovo Group
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SCANSOURCE and Lenovo is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding SCANSOURCE 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 SCANSOURCE 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 SCANSOURCE 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 SCANSOURCE i.e., SCANSOURCE and Lenovo Group go up and down completely randomly.
Pair Corralation between SCANSOURCE and Lenovo Group
Assuming the 90 days trading horizon SCANSOURCE is expected to generate 0.74 times more return on investment than Lenovo Group. However, SCANSOURCE is 1.36 times less risky than Lenovo Group. It trades about 0.07 of its potential returns per unit of risk. Lenovo Group Limited is currently generating about 0.05 per unit of risk. If you would invest 2,720 in SCANSOURCE on September 13, 2024 and sell it today you would earn a total of 2,330 from holding SCANSOURCE or generate 85.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SCANSOURCE vs. Lenovo Group Limited
Performance |
| Timeline |
| SCANSOURCE |
| Lenovo Group Limited |
SCANSOURCE and Lenovo Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SCANSOURCE and Lenovo Group
The main advantage of trading using opposite SCANSOURCE and Lenovo Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SCANSOURCE 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.The idea behind SCANSOURCE and Lenovo Group Limited 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.| Lenovo Group vs. JIAHUA STORES | Lenovo Group vs. COSTCO WHOLESALE CDR | Lenovo Group vs. Retail Estates NV | Lenovo Group vs. SCANSOURCE |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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