Correlation Between Li Auto and HYZON Motors

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Can any of the company-specific risk be diversified away by investing in both Li Auto and HYZON Motors 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 HYZON Motors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Li Auto and HYZON Motors, you can compare the effects of market volatilities on Li Auto and HYZON Motors 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 HYZON Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Li Auto and HYZON Motors.

Diversification Opportunities for Li Auto and HYZON Motors

Li AutoHYZONDiversified AwayLi AutoHYZONDiversified Away100%
0.27
  Correlation Coefficient

Modest diversification

The 3 months correlation between Li Auto and HYZON is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Li Auto and HYZON Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HYZON Motors 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 HYZON Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HYZON Motors has no effect on the direction of Li Auto i.e., Li Auto and HYZON Motors go up and down completely randomly.

Pair Corralation between Li Auto and HYZON Motors

Allowing for the 90-day total investment horizon Li Auto is expected to generate 5.1 times less return on investment than HYZON Motors. But when comparing it to its historical volatility, Li Auto is 4.34 times less risky than HYZON Motors. It trades about 0.07 of its potential returns per unit of risk. HYZON Motors is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1.66  in HYZON Motors on September 15, 2024 and sell it today you would earn a total of  0.10  from holding HYZON Motors or generate 6.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Li Auto  vs.  HYZON Motors

 Performance 
JavaScript chart by amCharts 3.21.15OctNov -20020406080100
JavaScript chart by amCharts 3.21.15LI HYZNW
       Timeline  
Li Auto 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Li Auto are ranked lower than 5 (%) 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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec222426283032
HYZON Motors 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in HYZON Motors are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, HYZON Motors showed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec0.0150.020.0250.030.0350.040.0450.05

Li Auto and HYZON Motors Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-14.06-10.53-7.0-3.470.06123.617.2810.9514.62 0.0050.0100.0150.020
JavaScript chart by amCharts 3.21.15LI HYZNW
       Returns  

Pair Trading with Li Auto and HYZON Motors

The main advantage of trading using opposite Li Auto and HYZON Motors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Li Auto position performs unexpectedly, HYZON Motors 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 HYZON Motors will offset losses from the drop in HYZON Motors' long position.
The idea behind Li Auto and HYZON Motors 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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