Correlation Between Li Auto and Nascent Wine

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

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

Diversification Opportunities for Li Auto and Nascent Wine

0.0

Correlation Coefficient

Li Auto  Nascent Wine

Pay attention - limited upside

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

Pair Corralation between Li Auto and Nascent Wine

If you would invest  1,905  in Li Auto on September 15, 2024 and sell it today you would earn a total of  315.00  from holding Li Auto or generate 16.54% return on investment over 90 days.

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

Li Auto  vs.  Nascent Wine

Li Auto

Risk-Adjusted Performance

5 of 100

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 weak forward indicators, Li Auto demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Nascent Wine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nascent Wine has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Nascent Wine is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Li Auto and Nascent Wine

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

The idea behind Li Auto and Nascent Wine 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.