Correlation Between Visteon Corp and Li Auto

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

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

Diversification Opportunities for Visteon Corp and Li Auto

-0.14

Correlation Coefficient

Visteon Corp  Li Auto

Good diversification

The 3 months correlation between Visteon and Li Auto is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Visteon Corp and Li Auto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Auto and Visteon Corp 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 Visteon Corp 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 Visteon Corp i.e., Visteon Corp and Li Auto go up and down completely randomly.

Pair Corralation between Visteon Corp and Li Auto

Allowing for the 90-day total investment horizon Visteon Corp is expected to under-perform the Li Auto. But the stock apears to be less risky and, when comparing its historical volatility, Visteon Corp is 2.23 times less risky than Li Auto. The stock trades about -0.05 of its potential returns per unit of risk. The Li Auto is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,368  in Li Auto on November 28, 2024 and sell it today you would earn a total of  895.50  from holding Li Auto or generate 37.82% return on investment over 90 days.

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

Visteon Corp  vs.  Li Auto

Visteon Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Visteon Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Visteon Corp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Li Auto

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Li Auto are ranked lower than 12 (%) 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 Visteon Corp and Li Auto

The main advantage of trading using opposite Visteon Corp and Li Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visteon Corp 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 Visteon Corp 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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.