Correlation Between Li Auto and Zapp Electric
Can any of the company-specific risk be diversified away by investing in both Li Auto and Zapp Electric 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 Zapp Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Li Auto and Zapp Electric Vehicles, you can compare the effects of market volatilities on Li Auto and Zapp Electric 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 Zapp Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Li Auto and Zapp Electric.
Diversification Opportunities for Li Auto and Zapp Electric
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Li Auto and Zapp is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Li Auto and Zapp Electric Vehicles in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zapp Electric Vehicles 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 Zapp Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zapp Electric Vehicles has no effect on the direction of Li Auto i.e., Li Auto and Zapp Electric go up and down completely randomly.
Pair Corralation between Li Auto and Zapp Electric
Allowing for the 90-day total investment horizon Li Auto is expected to under-perform the Zapp Electric. But the stock apears to be less risky and, when comparing its historical volatility, Li Auto is 5.72 times less risky than Zapp Electric. The stock trades about -0.02 of its potential returns per unit of risk. The Zapp Electric Vehicles is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 0.96 in Zapp Electric Vehicles on September 2, 2024 and sell it today you would lose (0.05) from holding Zapp Electric Vehicles or give up 5.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 89.52% |
| Values | Daily Returns |
Li Auto vs. Zapp Electric Vehicles
Performance |
| Timeline |
| Li Auto |
| Zapp Electric Vehicles |
Li Auto and Zapp Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Li Auto and Zapp Electric
The main advantage of trading using opposite Li Auto and Zapp Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Li Auto position performs unexpectedly, Zapp Electric 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 Zapp Electric will offset losses from the drop in Zapp Electric's long position.The idea behind Li Auto and Zapp Electric Vehicles 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.| Zapp Electric vs. Ford Motor | Zapp Electric vs. General Motors | Zapp Electric vs. Goodyear Tire Rubber | Zapp Electric vs. Li Auto |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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