Correlation Between Li Auto and Socket Mobile
Can any of the company-specific risk be diversified away by investing in both Li Auto and Socket Mobile 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 Socket Mobile into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Li Auto and Socket Mobile, you can compare the effects of market volatilities on Li Auto and Socket Mobile 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 Socket Mobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Li Auto and Socket Mobile.
Diversification Opportunities for Li Auto and Socket Mobile
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Li Auto and Socket is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Li Auto and Socket Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Socket Mobile 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 Socket Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Socket Mobile has no effect on the direction of Li Auto i.e., Li Auto and Socket Mobile go up and down completely randomly.
Pair Corralation between Li Auto and Socket Mobile
Allowing for the 90-day total investment horizon Li Auto is expected to generate 9.05 times less return on investment than Socket Mobile. But when comparing it to its historical volatility, Li Auto is 1.58 times less risky than Socket Mobile. It trades about 0.03 of its potential returns per unit of risk. Socket Mobile is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 122.00 in Socket Mobile on September 13, 2024 and sell it today you would earn a total of 20.00 from holding Socket Mobile or generate 16.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Li Auto vs. Socket Mobile
Performance |
| Timeline |
| Li Auto |
| Socket Mobile |
Li Auto and Socket Mobile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Li Auto and Socket Mobile
The main advantage of trading using opposite Li Auto and Socket Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Li Auto position performs unexpectedly, Socket Mobile 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 Socket Mobile will offset losses from the drop in Socket Mobile's long position.The idea behind Li Auto and Socket Mobile 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.| Socket Mobile vs. Cricut Inc | Socket Mobile vs. Nano Dimension | Socket Mobile vs. IONQ Inc | Socket Mobile vs. AGM Group Holdings |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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