Correlation Between ServiceNow and Li Auto
Can any of the company-specific risk be diversified away by investing in both ServiceNow 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 ServiceNow and Li Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ServiceNow and Li Auto, you can compare the effects of market volatilities on ServiceNow 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 ServiceNow with a short position of Li Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of ServiceNow and Li Auto.
Diversification Opportunities for ServiceNow and Li Auto
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between ServiceNow and Li Auto is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding ServiceNow and Li Auto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Auto and ServiceNow 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 ServiceNow 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 ServiceNow i.e., ServiceNow and Li Auto go up and down completely randomly.
Pair Corralation between ServiceNow and Li Auto
Considering the 90-day investment horizon ServiceNow is expected to under-perform the Li Auto. But the stock apears to be less risky and, when comparing its historical volatility, ServiceNow is 1.68 times less risky than Li Auto. The stock trades about -0.29 of its potential returns per unit of risk. The Li Auto is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 2,361 in Li Auto on November 28, 2024 and sell it today you would earn a total of 902.50 from holding Li Auto or generate 38.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ServiceNow vs. Li Auto
Performance |
| Timeline |
| ServiceNow |
| Li Auto |
ServiceNow and Li Auto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ServiceNow and Li Auto
The main advantage of trading using opposite ServiceNow and Li Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ServiceNow 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.| ServiceNow vs. Autodesk | ServiceNow vs. Intuit Inc | ServiceNow vs. Zoom Video Communications | ServiceNow vs. Snowflake |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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