Correlation Between Li Auto and Blue Capital

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

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

Diversification Opportunities for Li Auto and Blue Capital

-0.37

Correlation Coefficient

Li Auto  Blue Capital

Very good diversification

The 3 months correlation between Li Auto and Blue is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Li Auto and Blue Capital Reinsurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Capital Reinsurance and Li Auto 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 Auto are associated (or correlated) with Blue Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Capital Reinsurance has no effect on the direction of Li Auto i.e., Li Auto and Blue Capital go up and down completely randomly.

Pair Corralation between Li Auto and Blue Capital

If you would invest  0.02  in Blue Capital Reinsurance on October 12, 2024 and sell it today you would earn a total of  0.00  from holding Blue Capital Reinsurance or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	5.0%
Values	Daily Returns

Li Auto  vs.  Blue Capital Reinsurance

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 unfluctuating performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Blue Capital Reinsurance

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Li Auto and Blue Capital

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

The idea behind Li Auto and Blue Capital Reinsurance 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .