Correlation Between Li Auto and PHINIA

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

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

Diversification Opportunities for Li Auto and PHINIA

-0.79

Correlation Coefficient

Li Auto  PHINIA

Pay attention - limited upside

The 3 months correlation between Li Auto and PHINIA is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Li Auto and PHINIA Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHINIA Inc 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 PHINIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHINIA Inc has no effect on the direction of Li Auto i.e., Li Auto and PHINIA go up and down completely randomly.

Pair Corralation between Li Auto and PHINIA

Allowing for the 90-day total investment horizon Li Auto is expected to generate 1.91 times more return on investment than PHINIA. However, Li Auto is 1.91 times more volatile than PHINIA Inc. It trades about 0.17 of its potential returns per unit of risk. PHINIA Inc is currently generating about -0.3 per unit of risk. If you would invest  2,253  in Li Auto on October 6, 2024 and sell it today you would earn a total of  222.00  from holding Li Auto or generate 9.85% return on investment over 90 days.

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

Li Auto  vs.  PHINIA Inc

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.

PHINIA Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PHINIA Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, PHINIA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Li Auto and PHINIA

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

The idea behind Li Auto and PHINIA Inc 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.