Correlation Between Dorman Products and Li Auto
Can any of the company-specific risk be diversified away by investing in both Dorman Products 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 Dorman Products and Li Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dorman Products and Li Auto, you can compare the effects of market volatilities on Dorman Products 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 Dorman Products with a short position of Li Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dorman Products and Li Auto.
Diversification Opportunities for Dorman Products and Li Auto
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dorman and Li Auto is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Dorman Products and Li Auto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Auto and Dorman Products 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 Dorman Products 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 Dorman Products i.e., Dorman Products and Li Auto go up and down completely randomly.
Pair Corralation between Dorman Products and Li Auto
Given the investment horizon of 90 days Dorman Products is expected to generate 0.71 times more return on investment than Li Auto. However, Dorman Products is 1.4 times less risky than Li Auto. It trades about 0.29 of its potential returns per unit of risk. Li Auto is currently generating about -0.18 per unit of risk. If you would invest 11,563 in Dorman Products on August 30, 2024 and sell it today you would earn a total of 2,417 from holding Dorman Products or generate 20.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dorman Products vs. Li Auto
Performance |
| Timeline |
| Dorman Products |
| Li Auto |
Dorman Products and Li Auto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dorman Products and Li Auto
The main advantage of trading using opposite Dorman Products and Li Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dorman Products 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.| Dorman Products vs. Ford Motor | Dorman Products vs. General Motors | Dorman Products vs. Goodyear Tire Rubber | Dorman Products vs. Li Auto |
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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