Correlation Between Li Auto and Stellantis

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

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

Diversification Opportunities for Li Auto and Stellantis

-0.1

Correlation Coefficient

Li Auto  Stellantis

Good diversification

The 3 months correlation between Li Auto and Stellantis is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Li Auto and Stellantis NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stellantis NV 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 Stellantis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stellantis NV has no effect on the direction of Li Auto i.e., Li Auto and Stellantis go up and down completely randomly.

Pair Corralation between Li Auto and Stellantis

Allowing for the 90-day total investment horizon Li Auto is expected to generate 1.55 times more return on investment than Stellantis. However, Li Auto is 1.55 times more volatile than Stellantis NV. It trades about 0.04 of its potential returns per unit of risk. Stellantis NV is currently generating about -0.07 per unit of risk. If you would invest  2,427  in Li Auto on December 30, 2024 and sell it today you would earn a total of  125.00  from holding Li Auto or generate 5.15% return on investment over 90 days.

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

Li Auto  vs.  Stellantis NV

Li Auto

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Li Auto are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating forward indicators, Li Auto may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Stellantis NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stellantis NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Li Auto and Stellantis

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

The idea behind Li Auto and Stellantis NV 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.