Correlation Between Li Auto and Helio
Can any of the company-specific risk be diversified away by investing in both Li Auto and Helio 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 Li Auto and Helio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Li Auto and Helio, you can compare the effects of market volatilities on Li Auto and Helio 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 Li Auto with a short position of Helio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Li Auto and Helio.
Diversification Opportunities for Li Auto and Helio
Average diversification
The 3 months correlation between Li Auto and Helio is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Li Auto and Helio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Helio and Li Auto 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 Li Auto are associated (or correlated) with Helio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Helio has no effect on the direction of Li Auto i.e., Li Auto and Helio go up and down completely randomly.
Pair Corralation between Li Auto and Helio
Allowing for the 90-day total investment horizon Li Auto is expected to under-perform the Helio. But the stock apears to be less risky and, when comparing its historical volatility, Li Auto is 1.39 times less risky than Helio. The stock trades about -0.13 of its potential returns per unit of risk. The Helio is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest 450.00 in Helio on October 22, 2024 and sell it today you would earn a total of 148.00 from holding Helio or generate 32.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Li Auto vs. Helio
Performance |
| Timeline |
| Li Auto |
| Helio |
Li Auto and Helio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Li Auto and Helio
The main advantage of trading using opposite Li Auto and Helio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Li Auto position performs unexpectedly, Helio 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 Helio will offset losses from the drop in Helio's long position.The idea behind Li Auto and Helio 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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