Correlation Between Coca Cola and Li Auto
Can any of the company-specific risk be diversified away by investing in both Coca Cola 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 Coca Cola and Li Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Coca Cola and Li Auto, you can compare the effects of market volatilities on Coca Cola 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 Coca Cola with a short position of Li Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Li Auto.
Diversification Opportunities for Coca Cola and Li Auto
Good diversification
The 3 months correlation between Coca and Li Auto is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Li Auto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Auto and Coca Cola 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 The Coca Cola 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 Coca Cola i.e., Coca Cola and Li Auto go up and down completely randomly.
Pair Corralation between Coca Cola and Li Auto
Allowing for the 90-day total investment horizon Coca Cola is expected to generate 4.98 times less return on investment than Li Auto. But when comparing it to its historical volatility, The Coca Cola is 4.59 times less risky than Li Auto. It trades about 0.02 of its potential returns per unit of risk. Li Auto is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,112 in Li Auto on August 30, 2024 and sell it today you would earn a total of 219.00 from holding Li Auto or generate 10.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Coca Cola vs. Li Auto
Performance |
| Timeline |
| Coca Cola |
| Li Auto |
Coca Cola and Li Auto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Li Auto
The main advantage of trading using opposite Coca Cola and Li Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola 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.| Coca Cola vs. Celsius Holdings | Coca Cola vs. Coca Cola European Partners | Coca Cola vs. Capital Income Builder | Coca Cola vs. Direxion Daily FTSE |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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