Correlation Between Li Auto and Mediag3

Can any of the company-specific risk be diversified away by investing in both Li Auto and Mediag3 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 Mediag3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Li Auto and Mediag3, you can compare the effects of market volatilities on Li Auto and Mediag3 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 Mediag3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Li Auto and Mediag3.

Diversification Opportunities for Li Auto and Mediag3

0.0

Correlation Coefficient

Li Auto  Mediag3

Pay attention - limited upside

The 3 months correlation between Li Auto and Mediag3 is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Li Auto and Mediag3 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mediag3 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 Mediag3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mediag3 has no effect on the direction of Li Auto i.e., Li Auto and Mediag3 go up and down completely randomly.

Pair Corralation between Li Auto and Mediag3

If you would invest  2,335  in Li Auto on December 19, 2024 and sell it today you would earn a total of  427.00  from holding Li Auto or generate 18.29% return on investment over 90 days.

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

Li Auto  vs.  Mediag3

Li Auto

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Li Auto are ranked lower than 6 (%) 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.

Mediag3

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mediag3 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Mediag3 is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Li Auto and Mediag3

The main advantage of trading using opposite Li Auto and Mediag3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Li Auto position performs unexpectedly, Mediag3 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 Mediag3 will offset losses from the drop in Mediag3's long position.

The idea behind Li Auto and Mediag3 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.