Correlation Between ECD Automotive and Li Auto
Can any of the company-specific risk be diversified away by investing in both ECD Automotive 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 ECD Automotive and Li Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ECD Automotive Design and Li Auto, you can compare the effects of market volatilities on ECD Automotive 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 ECD Automotive with a short position of Li Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECD Automotive and Li Auto.
Diversification Opportunities for ECD Automotive and Li Auto
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ECD and Li Auto is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding ECD Automotive Design and Li Auto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Auto and ECD Automotive 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 ECD Automotive Design 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 ECD Automotive i.e., ECD Automotive and Li Auto go up and down completely randomly.
Pair Corralation between ECD Automotive and Li Auto
Given the investment horizon of 90 days ECD Automotive Design is expected to generate 1.08 times more return on investment than Li Auto. However, ECD Automotive is 1.08 times more volatile than Li Auto. It trades about -0.05 of its potential returns per unit of risk. Li Auto is currently generating about -0.18 per unit of risk. If you would invest 105.00 in ECD Automotive Design on August 30, 2024 and sell it today you would lose (8.00) from holding ECD Automotive Design or give up 7.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ECD Automotive Design vs. Li Auto
Performance |
| Timeline |
| ECD Automotive Design |
| Li Auto |
ECD Automotive and Li Auto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ECD Automotive and Li Auto
The main advantage of trading using opposite ECD Automotive and Li Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECD Automotive 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.| ECD Automotive vs. Ford Motor | ECD Automotive vs. General Motors | ECD Automotive vs. Goodyear Tire Rubber | ECD Automotive 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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