Correlation Between TFI International and Li Auto

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

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

Diversification Opportunities for TFI International and Li Auto

-0.64

Correlation Coefficient

TFI International  Li Auto

Excellent diversification

The 3 months correlation between TFI and Li Auto is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding TFI International and Li Auto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Auto and TFI International 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 TFI International 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 TFI International i.e., TFI International and Li Auto go up and down completely randomly.

Pair Corralation between TFI International and Li Auto

Given the investment horizon of 90 days TFI International is expected to generate 5.45 times less return on investment than Li Auto. But when comparing it to its historical volatility, TFI International is 2.21 times less risky than Li Auto. It trades about 0.04 of its potential returns per unit of risk. Li Auto is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,900  in Li Auto on September 1, 2024 and sell it today you would earn a total of  468.00  from holding Li Auto or generate 24.63% return on investment over 90 days.

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

TFI International  vs.  Li Auto

TFI International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TFI International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, TFI International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Li Auto

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Li Auto are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating forward indicators, Li Auto demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TFI International and Li Auto

The main advantage of trading using opposite TFI International and Li Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TFI International 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 TFI International 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.