Correlation Between Harley Davidson and Li Auto
Can any of the company-specific risk be diversified away by investing in both Harley Davidson 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 Harley Davidson and Li Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Harley Davidson and Li Auto, you can compare the effects of market volatilities on Harley Davidson 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 Harley Davidson with a short position of Li Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harley Davidson and Li Auto.
Diversification Opportunities for Harley Davidson and Li Auto
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Harley and Li Auto is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Harley Davidson and Li Auto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Auto and Harley Davidson 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 Harley Davidson 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 Harley Davidson i.e., Harley Davidson and Li Auto go up and down completely randomly.
Pair Corralation between Harley Davidson and Li Auto
Considering the 90-day investment horizon Harley Davidson is expected to under-perform the Li Auto. But the stock apears to be less risky and, when comparing its historical volatility, Harley Davidson is 1.67 times less risky than Li Auto. The stock trades about -0.04 of its potential returns per unit of risk. The Li Auto is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,361 in Li Auto on November 19, 2024 and sell it today you would earn a total of 223.00 from holding Li Auto or generate 9.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Harley Davidson vs. Li Auto
Performance |
| Timeline |
| Harley Davidson |
| Li Auto |
Harley Davidson and Li Auto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Harley Davidson and Li Auto
The main advantage of trading using opposite Harley Davidson and Li Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harley Davidson 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.| Harley Davidson vs. Sonos Inc | Harley Davidson vs. United Parks Resorts | Harley Davidson vs. Academy Sports Outdoors | Harley Davidson vs. Uber Technologies |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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