Correlation Between 14575EAA3 and Li Auto

Can any of the company-specific risk be diversified away by investing in both 14575EAA3 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 14575EAA3 and Li Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between US14575EAA38 and Li Auto, you can compare the effects of market volatilities on 14575EAA3 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 14575EAA3 with a short position of Li Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of 14575EAA3 and Li Auto.

Diversification Opportunities for 14575EAA3 and Li Auto

0.01

Correlation Coefficient

14575EAA3  Li Auto

Significant diversification

The 3 months correlation between 14575EAA3 and Li Auto is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding US14575EAA38 and Li Auto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Auto and 14575EAA3 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 US14575EAA38 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 14575EAA3 i.e., 14575EAA3 and Li Auto go up and down completely randomly.

Pair Corralation between 14575EAA3 and Li Auto

Assuming the 90 days trading horizon US14575EAA38 is expected to generate 0.53 times more return on investment than Li Auto. However, US14575EAA38 is 1.88 times less risky than Li Auto. It trades about -0.03 of its potential returns per unit of risk. Li Auto is currently generating about -0.04 per unit of risk. If you would invest  9,929  in US14575EAA38 on October 8, 2024 and sell it today you would lose (355.00) from holding US14575EAA38 or give up 3.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	77.78%
Values	Daily Returns

US14575EAA38  vs.  Li Auto

US14575EAA38

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US14575EAA38 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 14575EAA3 is not utilizing all of its potentials. The current stock price disturbance, 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 unfluctuating 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 14575EAA3 and Li Auto

The main advantage of trading using opposite 14575EAA3 and Li Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 14575EAA3 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 US14575EAA38 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.