Correlation Between Gentex and Li Auto

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

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

Diversification Opportunities for Gentex and Li Auto

-0.09

Correlation Coefficient

Gentex  Li Auto

Good diversification

The 3 months correlation between Gentex and Li Auto is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Gentex and Li Auto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Auto and Gentex 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 Gentex 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 Gentex i.e., Gentex and Li Auto go up and down completely randomly.

Pair Corralation between Gentex and Li Auto

Given the investment horizon of 90 days Gentex is expected to generate 2.35 times less return on investment than Li Auto. But when comparing it to its historical volatility, Gentex is 2.95 times less risky than Li Auto. It trades about 0.05 of its potential returns per unit of risk. Li Auto is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,076  in Li Auto on September 18, 2024 and sell it today you would earn a total of  104.00  from holding Li Auto or generate 5.01% return on investment over 90 days.

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

Gentex  vs.  Li Auto

Gentex

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gentex are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Gentex is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Li Auto

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Gentex and Li Auto

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

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..