Correlation Between Treasury Wine and Lenovo Group

Can any of the company-specific risk be diversified away by investing in both Treasury Wine 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 Treasury Wine and Lenovo Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Treasury Wine Estates and Lenovo Group Limited, you can compare the effects of market volatilities on Treasury Wine 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 Treasury Wine with a short position of Lenovo Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Treasury Wine and Lenovo Group.

Diversification Opportunities for Treasury Wine and Lenovo Group

0.62

Correlation Coefficient

Treasury Wine  Lenovo Group

Poor diversification

The 3 months correlation between Treasury and Lenovo is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates 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 Treasury Wine 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 Treasury Wine Estates 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 Treasury Wine i.e., Treasury Wine and Lenovo Group go up and down completely randomly.

Pair Corralation between Treasury Wine and Lenovo Group

Assuming the 90 days horizon Treasury Wine is expected to generate 1.26 times less return on investment than Lenovo Group. But when comparing it to its historical volatility, Treasury Wine Estates is 1.41 times less risky than Lenovo Group. It trades about 0.06 of its potential returns per unit of risk. Lenovo Group Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,099  in Lenovo Group Limited on September 14, 2024 and sell it today you would earn a total of  141.00  from holding Lenovo Group Limited or generate 6.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Treasury Wine Estates  vs.  Lenovo Group Limited

Treasury Wine Estates

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Treasury Wine Estates are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Treasury Wine may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lenovo Group Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lenovo Group Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Lenovo Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Treasury Wine and Lenovo Group

The main advantage of trading using opposite Treasury Wine and Lenovo Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Treasury Wine 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 Treasury Wine Estates 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.