Correlation Between Li Auto and 126408GW7

Can any of the company-specific risk be diversified away by investing in both Li Auto and 126408GW7 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 126408GW7 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Li Auto and CSX P 475, you can compare the effects of market volatilities on Li Auto and 126408GW7 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 126408GW7. Check out your portfolio center. Please also check ongoing floating volatility patterns of Li Auto and 126408GW7.

Diversification Opportunities for Li Auto and 126408GW7

0.38

Correlation Coefficient

Li Auto  126408GW7

Weak diversification

The 3 months correlation between Li Auto and 126408GW7 is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Li Auto and CSX P 475 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSX P 475 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 126408GW7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSX P 475 has no effect on the direction of Li Auto i.e., Li Auto and 126408GW7 go up and down completely randomly.

Pair Corralation between Li Auto and 126408GW7

Allowing for the 90-day total investment horizon Li Auto is expected to under-perform the 126408GW7. In addition to that, Li Auto is 2.94 times more volatile than CSX P 475. It trades about -0.09 of its total potential returns per unit of risk. CSX P 475 is currently generating about 0.02 per unit of volatility. If you would invest  9,289  in CSX P 475 on October 26, 2024 and sell it today you would earn a total of  50.00  from holding CSX P 475 or generate 0.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	75.0%
Values	Daily Returns

Li Auto  vs.  CSX P 475

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.

CSX P 475

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CSX P 475 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 126408GW7 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Li Auto and 126408GW7

The main advantage of trading using opposite Li Auto and 126408GW7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Li Auto position performs unexpectedly, 126408GW7 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 126408GW7 will offset losses from the drop in 126408GW7's long position.

The idea behind Li Auto and CSX P 475 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.