Correlation Between Almacenes Xito and Li Auto

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

By analyzing existing cross correlation between Almacenes xito SA and Li Auto, you can compare the effects of market volatilities on Almacenes Xito and Li Auto 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 Almacenes Xito with a short position of Li Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Almacenes Xito and Li Auto.

Diversification Opportunities for Almacenes Xito and Li Auto

0.56

Correlation Coefficient

Almacenes Xito  Li Auto

Very weak diversification

The 3 months correlation between Almacenes and Li Auto is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Almacenes xito SA and Li Auto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Auto and Almacenes Xito 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 Almacenes xito SA are associated (or correlated) with Li Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Auto has no effect on the direction of Almacenes Xito i.e., Almacenes Xito and Li Auto go up and down completely randomly.

Pair Corralation between Almacenes Xito and Li Auto

Given the investment horizon of 90 days Almacenes xito SA is expected to under-perform the Li Auto. In addition to that, Almacenes Xito is 2.16 times more volatile than Li Auto. It trades about -0.05 of its total potential returns per unit of risk. Li Auto is currently generating about -0.01 per unit of volatility. If you would invest  2,410  in Li Auto on October 10, 2024 and sell it today you would lose (21.00) from holding Li Auto or give up 0.87% of portfolio value over 90 days.

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

Almacenes xito SA  vs.  Li Auto

Almacenes xito SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Almacenes xito SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Li Auto

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Li Auto has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Almacenes Xito and Li Auto

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

The idea behind Almacenes xito SA and Li Auto 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.