Correlation Between Li Auto and Kandi Technologies

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

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

Diversification Opportunities for Li Auto and Kandi Technologies

0.74

Correlation Coefficient

Li Auto  Kandi Technologies

Poor diversification

The 3 months correlation between Li Auto and Kandi is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Li Auto and Kandi Technologies Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kandi Technologies 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 Kandi Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kandi Technologies has no effect on the direction of Li Auto i.e., Li Auto and Kandi Technologies go up and down completely randomly.

Pair Corralation between Li Auto and Kandi Technologies

Allowing for the 90-day total investment horizon Li Auto is expected to generate 5.18 times less return on investment than Kandi Technologies. But when comparing it to its historical volatility, Li Auto is 1.5 times less risky than Kandi Technologies. It trades about 0.04 of its potential returns per unit of risk. Kandi Technologies Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  98.00  in Kandi Technologies Group on December 27, 2024 and sell it today you would earn a total of  46.00  from holding Kandi Technologies Group or generate 46.94% return on investment over 90 days.

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

Li Auto  vs.  Kandi Technologies Group

Li Auto

Risk-Adjusted Performance

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 April 2025.

Kandi Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kandi Technologies Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating fundamental indicators, Kandi Technologies demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Li Auto and Kandi Technologies

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

The idea behind Li Auto and Kandi Technologies Group 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.