Correlation Between Volcon and Li Auto

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

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

Diversification Opportunities for Volcon and Li Auto

-0.8

Correlation Coefficient

Volcon  Li Auto

Pay attention - limited upside

The 3 months correlation between Volcon and Li Auto is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Volcon Inc and Li Auto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Auto and Volcon 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 Volcon Inc 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 Volcon i.e., Volcon and Li Auto go up and down completely randomly.

Pair Corralation between Volcon and Li Auto

Given the investment horizon of 90 days Volcon Inc is expected to under-perform the Li Auto. In addition to that, Volcon is 1.87 times more volatile than Li Auto. It trades about -0.33 of its total potential returns per unit of risk. Li Auto is currently generating about 0.16 per unit of volatility. 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	Significant
Accuracy	100.0%
Values	Daily Returns

Volcon Inc  vs.  Li Auto

Volcon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Volcon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Li Auto

Risk-Adjusted Performance

OK

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 Volcon and Li Auto

The main advantage of trading using opposite Volcon and Li Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volcon 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 Volcon Inc 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.