Correlation Between Li Auto and Teradyne

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

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

Diversification Opportunities for Li Auto and Teradyne

0.36

Correlation Coefficient

Li Auto  Teradyne

Weak diversification

The 3 months correlation between Li Auto and Teradyne is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Li Auto and Teradyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradyne 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 Teradyne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teradyne has no effect on the direction of Li Auto i.e., Li Auto and Teradyne go up and down completely randomly.

Pair Corralation between Li Auto and Teradyne

Allowing for the 90-day total investment horizon Li Auto is expected to generate 1.4 times less return on investment than Teradyne. In addition to that, Li Auto is 1.4 times more volatile than Teradyne. It trades about 0.17 of its total potential returns per unit of risk. Teradyne is currently generating about 0.34 per unit of volatility. If you would invest  11,372  in Teradyne on October 6, 2024 and sell it today you would earn a total of  1,688  from holding Teradyne or generate 14.84% return on investment over 90 days.

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

Li Auto  vs.  Teradyne

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.

Teradyne

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Teradyne are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Teradyne is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Li Auto and Teradyne

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

The idea behind Li Auto and Teradyne 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.