Correlation Between Dana and Li Auto
Can any of the company-specific risk be diversified away by investing in both Dana 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 Dana and Li Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dana Inc and Li Auto, you can compare the effects of market volatilities on Dana 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 Dana with a short position of Li Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dana and Li Auto.
Diversification Opportunities for Dana and Li Auto
Average diversification
The 3 months correlation between Dana and Li Auto is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Dana Inc and Li Auto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Auto and Dana 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 Dana 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 Dana i.e., Dana and Li Auto go up and down completely randomly.
Pair Corralation between Dana and Li Auto
Considering the 90-day investment horizon Dana Inc is expected to generate 0.97 times more return on investment than Li Auto. However, Dana Inc is 1.03 times less risky than Li Auto. It trades about 0.42 of its potential returns per unit of risk. Li Auto is currently generating about -0.06 per unit of risk. If you would invest 758.00 in Dana Inc on September 1, 2024 and sell it today you would earn a total of 242.00 from holding Dana Inc or generate 31.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dana Inc vs. Li Auto
Performance |
| Timeline |
| Dana Inc |
| Li Auto |
Dana and Li Auto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dana and Li Auto
The main advantage of trading using opposite Dana and Li Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dana 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 Dana 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.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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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