Correlation Between Magna International and Li Auto
Can any of the company-specific risk be diversified away by investing in both Magna International and Li Auto 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 Magna International and Li Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magna International and Li Auto, you can compare the effects of market volatilities on Magna International and Li Auto 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 Magna International with a short position of Li Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna International and Li Auto.
Diversification Opportunities for Magna International and Li Auto
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Magna and Li Auto is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Li Auto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Auto and Magna International 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 Magna International are associated (or correlated) with Li Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Auto has no effect on the direction of Magna International i.e., Magna International and Li Auto go up and down completely randomly.
Pair Corralation between Magna International and Li Auto
Considering the 90-day investment horizon Magna International is expected to under-perform the Li Auto. But the stock apears to be less risky and, when comparing its historical volatility, Magna International is 2.29 times less risky than Li Auto. The stock trades about -0.05 of its potential returns per unit of risk. The Li Auto is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 2,796 in Li Auto on October 20, 2024 and sell it today you would lose (537.00) from holding Li Auto or give up 19.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magna International vs. Li Auto
Performance |
| Timeline |
| Magna International |
| Li Auto |
Magna International and Li Auto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magna International and Li Auto
The main advantage of trading using opposite Magna International and Li Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna International position performs unexpectedly, Li Auto 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 Li Auto will offset losses from the drop in Li Auto's long position.| Magna International vs. Allison Transmission Holdings | Magna International vs. Aptiv PLC | Magna International vs. LKQ Corporation | Magna International vs. Lear Corporation |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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