Correlation Between Li Auto and Volkswagen
Can any of the company-specific risk be diversified away by investing in both Li Auto and Volkswagen 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 Volkswagen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Li Auto and Volkswagen AG 110, you can compare the effects of market volatilities on Li Auto and Volkswagen 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 Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Li Auto and Volkswagen.
Diversification Opportunities for Li Auto and Volkswagen
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Li Auto and Volkswagen is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Li Auto and Volkswagen AG 110 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG 110 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 Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG 110 has no effect on the direction of Li Auto i.e., Li Auto and Volkswagen go up and down completely randomly.
Pair Corralation between Li Auto and Volkswagen
Allowing for the 90-day total investment horizon Li Auto is expected to under-perform the Volkswagen. In addition to that, Li Auto is 2.44 times more volatile than Volkswagen AG 110. It trades about -0.04 of its total potential returns per unit of risk. Volkswagen AG 110 is currently generating about -0.05 per unit of volatility. If you would invest 1,232 in Volkswagen AG 110 on September 14, 2024 and sell it today you would lose (300.00) from holding Volkswagen AG 110 or give up 24.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.63% |
| Values | Daily Returns |
Li Auto vs. Volkswagen AG 110
Performance |
| Timeline |
| Li Auto |
| Volkswagen AG 110 |
Li Auto and Volkswagen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Li Auto and Volkswagen
The main advantage of trading using opposite Li Auto and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Li Auto position performs unexpectedly, Volkswagen 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 Volkswagen will offset losses from the drop in Volkswagen's long position.The idea behind Li Auto and Volkswagen AG 110 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.| Volkswagen vs. Porsche Automobile Holding | Volkswagen vs. Bayerische Motoren Werke | Volkswagen vs. Volkswagen AG | Volkswagen vs. Mercedes Benz Group AG |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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