Correlation Between Li Auto and Volcon
Can any of the company-specific risk be diversified away by investing in both Li Auto and Volcon 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 Volcon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Li Auto and Volcon Inc, you can compare the effects of market volatilities on Li Auto and Volcon 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 Volcon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Li Auto and Volcon.
Diversification Opportunities for Li Auto and Volcon
Excellent diversification
The 3 months correlation between Li Auto and Volcon is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Li Auto and Volcon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volcon Inc 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 Volcon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volcon Inc has no effect on the direction of Li Auto i.e., Li Auto and Volcon go up and down completely randomly.
Pair Corralation between Li Auto and Volcon
Allowing for the 90-day total investment horizon Li Auto is expected to generate 0.41 times more return on investment than Volcon. However, Li Auto is 2.42 times less risky than Volcon. It trades about 0.02 of its potential returns per unit of risk. Volcon Inc is currently generating about -0.18 per unit of risk. 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Li Auto vs. Volcon Inc
Performance |
| Timeline |
| Li Auto |
| Volcon Inc |
Li Auto and Volcon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Li Auto and Volcon
The main advantage of trading using opposite Li Auto and Volcon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Li Auto position performs unexpectedly, Volcon 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 Volcon will offset losses from the drop in Volcon's long position.The idea behind Li Auto and Volcon Inc 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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