Correlation Between Li Auto and Volcon

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

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

Diversification Opportunities for Li Auto and Volcon

-0.79

Correlation Coefficient

Li Auto  Volcon

Pay attention - limited upside

The 3 months correlation between Li Auto and Volcon is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Li Auto and Volcon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volcon Inc 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 Volcon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volcon Inc has no effect on the direction of Li Auto i.e., Li Auto and Volcon go up and down completely randomly.

Pair Corralation between Li Auto and Volcon

Allowing for the 90-day total investment horizon Li Auto is expected to generate 0.52 times more return on investment than Volcon. However, Li Auto is 1.9 times less risky than Volcon. It trades about 0.04 of its potential returns per unit of risk. Volcon Inc is currently generating about -0.27 per unit of risk. If you would invest  2,427  in Li Auto on December 28, 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	Weak
Accuracy	100.0%
Values	Daily Returns

Li Auto  vs.  Volcon Inc

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.

Volcon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Volcon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Li Auto and Volcon

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

The idea behind Li Auto and Volcon Inc 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.