Correlation Between ZEEKR Intelligent and Li Auto

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

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

Diversification Opportunities for ZEEKR Intelligent and Li Auto

0.81

Correlation Coefficient

ZEEKR Intelligent  Li Auto

Very poor diversification

The 3 months correlation between ZEEKR and Li Auto is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding ZEEKR Intelligent Technology and Li Auto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Auto and ZEEKR Intelligent 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 ZEEKR Intelligent Technology 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 ZEEKR Intelligent i.e., ZEEKR Intelligent and Li Auto go up and down completely randomly.

Pair Corralation between ZEEKR Intelligent and Li Auto

Allowing for the 90-day total investment horizon ZEEKR Intelligent Technology is expected to generate 1.56 times more return on investment than Li Auto. However, ZEEKR Intelligent is 1.56 times more volatile than Li Auto. It trades about 0.11 of its potential returns per unit of risk. Li Auto is currently generating about 0.09 per unit of risk. If you would invest  1,618  in ZEEKR Intelligent Technology on August 30, 2024 and sell it today you would earn a total of  626.00  from holding ZEEKR Intelligent Technology or generate 38.69% return on investment over 90 days.

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

ZEEKR Intelligent Technology  vs.  Li Auto

ZEEKR Intelligent

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ZEEKR Intelligent Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, ZEEKR Intelligent disclosed solid returns over the last few months and may actually be approaching a breakup point.

Li Auto

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Li Auto are ranked lower than 6 (%) 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 ZEEKR Intelligent and Li Auto

The main advantage of trading using opposite ZEEKR Intelligent and Li Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ZEEKR Intelligent 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 ZEEKR Intelligent Technology 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.