Correlation Between Marfrig Global and Li Auto

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

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

Diversification Opportunities for Marfrig Global and Li Auto

-0.54

Correlation Coefficient

Marfrig Global  Li Auto

Excellent diversification

The 3 months correlation between Marfrig and Li Auto is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Marfrig Global Foods and Li Auto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Auto and Marfrig Global 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 Marfrig Global Foods are associated (or correlated) with Li Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Auto has no effect on the direction of Marfrig Global i.e., Marfrig Global and Li Auto go up and down completely randomly.

Pair Corralation between Marfrig Global and Li Auto

Assuming the 90 days horizon Marfrig Global Foods is expected to generate 1.08 times more return on investment than Li Auto. However, Marfrig Global is 1.08 times more volatile than Li Auto. It trades about 0.03 of its potential returns per unit of risk. Li Auto is currently generating about -0.07 per unit of risk. If you would invest  244.00  in Marfrig Global Foods on October 23, 2024 and sell it today you would earn a total of  8.00  from holding Marfrig Global Foods or generate 3.28% return on investment over 90 days.

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

Marfrig Global Foods  vs.  Li Auto

Marfrig Global Foods

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marfrig Global Foods are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Marfrig Global may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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.

Pair Trading with Marfrig Global and Li Auto

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

The idea behind Marfrig Global Foods and Li Auto 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..