Correlation Between ANTA Sports and Li Ning

Can any of the company-specific risk be diversified away by investing in both ANTA Sports 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 ANTA Sports and Li Ning into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ANTA Sports Products and Li Ning Co, you can compare the effects of market volatilities on ANTA Sports 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 ANTA Sports with a short position of Li Ning. Check out your portfolio center. Please also check ongoing floating volatility patterns of ANTA Sports and Li Ning.

Diversification Opportunities for ANTA Sports and Li Ning

0.66

Correlation Coefficient

ANTA Sports  Li Ning

Poor diversification

The 3 months correlation between ANTA and LNNGY is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding ANTA Sports Products and Li Ning Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Ning and ANTA Sports 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 ANTA Sports Products 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 has no effect on the direction of ANTA Sports i.e., ANTA Sports and Li Ning go up and down completely randomly.

Pair Corralation between ANTA Sports and Li Ning

Assuming the 90 days horizon ANTA Sports is expected to generate 1.69 times less return on investment than Li Ning. But when comparing it to its historical volatility, ANTA Sports Products is 1.0 times less risky than Li Ning. It trades about 0.04 of its potential returns per unit of risk. Li Ning Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,538  in Li Ning Co on September 2, 2024 and sell it today you would earn a total of  721.00  from holding Li Ning Co or generate 15.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.88%
Values	Daily Returns

ANTA Sports Products  vs.  Li Ning Co

ANTA Sports Products

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ANTA Sports Products are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, ANTA Sports reported solid returns over the last few months and may actually be approaching a breakup point.

Li Ning

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Li Ning Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical and fundamental indicators, Li Ning showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ANTA Sports and Li Ning

The main advantage of trading using opposite ANTA Sports and Li Ning positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ANTA Sports 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.

The idea behind ANTA Sports Products and Li Ning Co 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.