Correlation Between Li Auto and Lordstown Motors
Can any of the company-specific risk be diversified away by investing in both Li Auto and Lordstown Motors 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 Lordstown Motors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Li Auto and Lordstown Motors Corp, you can compare the effects of market volatilities on Li Auto and Lordstown Motors 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 Lordstown Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Li Auto and Lordstown Motors.
Diversification Opportunities for Li Auto and Lordstown Motors
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Li Auto and Lordstown is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Li Auto and Lordstown Motors Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lordstown Motors Corp 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 Lordstown Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lordstown Motors Corp has no effect on the direction of Li Auto i.e., Li Auto and Lordstown Motors go up and down completely randomly.
Pair Corralation between Li Auto and Lordstown Motors
Allowing for the 90-day total investment horizon Li Auto is expected to generate 0.49 times more return on investment than Lordstown Motors. However, Li Auto is 2.03 times less risky than Lordstown Motors. It trades about 0.02 of its potential returns per unit of risk. Lordstown Motors Corp is currently generating about -0.13 per unit of risk. If you would invest 2,211 in Li Auto on August 24, 2024 and sell it today you would earn a total of 49.00 from holding Li Auto or generate 2.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 31.92% |
| Values | Daily Returns |
Li Auto vs. Lordstown Motors Corp
Performance |
| Timeline |
| Li Auto |
| Lordstown Motors Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Li Auto and Lordstown Motors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Li Auto and Lordstown Motors
The main advantage of trading using opposite Li Auto and Lordstown Motors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Li Auto position performs unexpectedly, Lordstown Motors 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 Lordstown Motors will offset losses from the drop in Lordstown Motors' long position.The idea behind Li Auto and Lordstown Motors Corp 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.| Lordstown Motors vs. Workhorse Group | Lordstown Motors vs. Canoo Inc | Lordstown Motors vs. Hyliion Holdings Corp | Lordstown Motors vs. Blink Charging Co |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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