Correlation Between National Beverage and Li Auto

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

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

Diversification Opportunities for National Beverage and Li Auto

-0.61

Correlation Coefficient

National Beverage  Li Auto

Excellent diversification

The 3 months correlation between National and Li Auto is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Li Auto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Auto and National Beverage 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 National Beverage Corp 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 National Beverage i.e., National Beverage and Li Auto go up and down completely randomly.

Pair Corralation between National Beverage and Li Auto

Given the investment horizon of 90 days National Beverage Corp is expected to under-perform the Li Auto. But the stock apears to be less risky and, when comparing its historical volatility, National Beverage Corp is 2.82 times less risky than Li Auto. The stock trades about -0.12 of its potential returns per unit of risk. The Li Auto is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,411  in Li Auto on December 21, 2024 and sell it today you would earn a total of  265.50  from holding Li Auto or generate 11.01% return on investment over 90 days.

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

National Beverage Corp  vs.  Li Auto

National Beverage Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Beverage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Li Auto

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Li Auto are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating forward indicators, Li Auto demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Beverage and Li Auto

The main advantage of trading using opposite National Beverage and Li Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage 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 National Beverage Corp 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.