Correlation Between Li Auto and Xos Equity
Can any of the company-specific risk be diversified away by investing in both Li Auto and Xos Equity 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 Xos Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Li Auto and Xos Equity Warrants, you can compare the effects of market volatilities on Li Auto and Xos Equity 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 Xos Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Li Auto and Xos Equity.
Diversification Opportunities for Li Auto and Xos Equity
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Li Auto and Xos is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Li Auto and Xos Equity Warrants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xos Equity Warrants 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 Xos Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xos Equity Warrants has no effect on the direction of Li Auto i.e., Li Auto and Xos Equity go up and down completely randomly.
Pair Corralation between Li Auto and Xos Equity
Allowing for the 90-day total investment horizon Li Auto is expected to generate 45.32 times less return on investment than Xos Equity. But when comparing it to its historical volatility, Li Auto is 17.81 times less risky than Xos Equity. It trades about 0.03 of its potential returns per unit of risk. Xos Equity Warrants is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4.70 in Xos Equity Warrants on September 3, 2024 and sell it today you would lose (4.28) from holding Xos Equity Warrants or give up 91.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.35% |
| Values | Daily Returns |
Li Auto vs. Xos Equity Warrants
Performance |
| Timeline |
| Li Auto |
| Xos Equity Warrants |
Li Auto and Xos Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Li Auto and Xos Equity
The main advantage of trading using opposite Li Auto and Xos Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Li Auto position performs unexpectedly, Xos Equity 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 Xos Equity will offset losses from the drop in Xos Equity's long position.| Li Auto vs. GreenPower Motor | Li Auto vs. ZEEKR Intelligent Technology | Li Auto vs. Volcon Inc | Li Auto vs. Ford Motor |
| Xos Equity vs. Microvast Holdings | Xos Equity vs. EVgo Equity Warrants | Xos Equity vs. Faraday Future Intelligent | Xos Equity vs. Xos Inc |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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