Correlation Between Li Auto and Rave Restaurant

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

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

Diversification Opportunities for Li Auto and Rave Restaurant

-0.44

Correlation Coefficient

Li Auto  Rave Restaurant

Very good diversification

The 3 months correlation between Li Auto and Rave is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Li Auto and Rave Restaurant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rave Restaurant Group 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 Rave Restaurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rave Restaurant Group has no effect on the direction of Li Auto i.e., Li Auto and Rave Restaurant go up and down completely randomly.

Pair Corralation between Li Auto and Rave Restaurant

Allowing for the 90-day total investment horizon Li Auto is expected to generate 1.1 times more return on investment than Rave Restaurant. However, Li Auto is 1.1 times more volatile than Rave Restaurant Group. It trades about -0.03 of its potential returns per unit of risk. Rave Restaurant Group is currently generating about -0.07 per unit of risk. If you would invest  2,433  in Li Auto on October 11, 2024 and sell it today you would lose (114.00) from holding Li Auto or give up 4.69% of portfolio value over 90 days.

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

Li Auto  vs.  Rave Restaurant Group

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 latest abnormal performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Rave Restaurant Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rave Restaurant Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Rave Restaurant may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Li Auto and Rave Restaurant

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

The idea behind Li Auto and Rave Restaurant 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.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.