Correlation Between Titan Machinery and Li Auto

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

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

Diversification Opportunities for Titan Machinery and Li Auto

-0.38

Correlation Coefficient

Titan Machinery  Li Auto

Very good diversification

The 3 months correlation between Titan and Li Auto is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Titan Machinery and Li Auto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Auto and Titan Machinery 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 Titan Machinery 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 Titan Machinery i.e., Titan Machinery and Li Auto go up and down completely randomly.

Pair Corralation between Titan Machinery and Li Auto

Given the investment horizon of 90 days Titan Machinery is expected to under-perform the Li Auto. In addition to that, Titan Machinery is 1.05 times more volatile than Li Auto. It trades about -0.16 of its total potential returns per unit of risk. Li Auto is currently generating about 0.04 per unit of volatility. If you would invest  2,288  in Li Auto on October 11, 2024 and sell it today you would earn a total of  31.00  from holding Li Auto or generate 1.35% return on investment over 90 days.

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

Titan Machinery  vs.  Li Auto

Titan Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Titan Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Titan Machinery is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

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 latest abnormal performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Titan Machinery and Li Auto

The main advantage of trading using opposite Titan Machinery and Li Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Titan Machinery 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 Titan Machinery 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.