Correlation Between Li Auto and Coca Cola
Can any of the company-specific risk be diversified away by investing in both Li Auto and Coca Cola 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 Coca Cola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Li Auto and The Coca Cola, you can compare the effects of market volatilities on Li Auto and Coca Cola 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 Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Li Auto and Coca Cola.
Diversification Opportunities for Li Auto and Coca Cola
Good diversification
The 3 months correlation between Li Auto and Coca is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Li Auto and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola has no effect on the direction of Li Auto i.e., Li Auto and Coca Cola go up and down completely randomly.
Pair Corralation between Li Auto and Coca Cola
Allowing for the 90-day total investment horizon Li Auto is expected to under-perform the Coca Cola. In addition to that, Li Auto is 3.99 times more volatile than The Coca Cola. It trades about -0.06 of its total potential returns per unit of risk. The Coca Cola is currently generating about -0.06 per unit of volatility. If you would invest 6,482 in The Coca Cola on September 1, 2024 and sell it today you would lose (74.00) from holding The Coca Cola or give up 1.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Li Auto vs. The Coca Cola
Performance |
| Timeline |
| Li Auto |
| Coca Cola |
Li Auto and Coca Cola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Li Auto and Coca Cola
The main advantage of trading using opposite Li Auto and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Li Auto position performs unexpectedly, Coca Cola 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 Coca Cola will offset losses from the drop in Coca Cola's long position.The idea behind Li Auto and The Coca Cola 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.| Coca Cola vs. Coca Cola Femsa SAB | Coca Cola vs. National Beverage Corp | Coca Cola vs. Embotelladora Andina SA |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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