Correlation Between Li Auto and RMG Acquisition

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

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

Diversification Opportunities for Li Auto and RMG Acquisition

0.0

Correlation Coefficient

Li Auto  RMG Acquisition

Pay attention - limited upside

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

Pair Corralation between Li Auto and RMG Acquisition

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	0.0%
Values	Daily Returns

Li Auto  vs.  RMG Acquisition Corp

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.

RMG Acquisition Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days RMG Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, RMG Acquisition is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Li Auto and RMG Acquisition

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

The idea behind Li Auto and RMG Acquisition Corp 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.