Correlation Between Li Ning and Shimano

Can any of the company-specific risk be diversified away by investing in both Li Ning and Shimano 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 Shimano 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 Shimano, you can compare the effects of market volatilities on Li Ning and Shimano 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 Shimano. Check out your portfolio center. Please also check ongoing floating volatility patterns of Li Ning and Shimano.

Diversification Opportunities for Li Ning and Shimano

0.25

Correlation Coefficient

Li Ning  Shimano

Modest diversification

The 3 months correlation between LNLB and Shimano is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Li Ning Company and Shimano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shimano 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 Shimano. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shimano has no effect on the direction of Li Ning i.e., Li Ning and Shimano go up and down completely randomly.

Pair Corralation between Li Ning and Shimano

Assuming the 90 days trading horizon Li Ning Company is expected to generate 2.03 times more return on investment than Shimano. However, Li Ning is 2.03 times more volatile than Shimano. It trades about -0.01 of its potential returns per unit of risk. Shimano is currently generating about -0.21 per unit of risk. If you would invest  214.00  in Li Ning Company on September 27, 2024 and sell it today you would lose (12.00) from holding Li Ning Company or give up 5.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Li Ning Company  vs.  Shimano

Li Ning Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Li Ning Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Li Ning is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Shimano

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shimano has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Li Ning and Shimano

The main advantage of trading using opposite Li Ning and Shimano positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Li Ning position performs unexpectedly, Shimano 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 Shimano will offset losses from the drop in Shimano's long position.

The idea behind Li Ning Company and Shimano 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.