Correlation Between Mullen Automotive and Li Auto

Can any of the company-specific risk be diversified away by investing in both Mullen Automotive 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 Mullen Automotive and Li Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mullen Automotive and Li Auto, you can compare the effects of market volatilities on Mullen Automotive 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 Mullen Automotive with a short position of Li Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mullen Automotive and Li Auto.

Diversification Opportunities for Mullen Automotive and Li Auto

-0.71

Correlation Coefficient

Mullen Automotive  Li Auto

Pay attention - limited upside

The 3 months correlation between Mullen and Li Auto is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Mullen Automotive and Li Auto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Auto and Mullen Automotive 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 Mullen Automotive 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 Mullen Automotive i.e., Mullen Automotive and Li Auto go up and down completely randomly.

Pair Corralation between Mullen Automotive and Li Auto

Given the investment horizon of 90 days Mullen Automotive is expected to under-perform the Li Auto. In addition to that, Mullen Automotive is 3.19 times more volatile than Li Auto. It trades about -0.17 of its total potential returns per unit of risk. Li Auto is currently generating about 0.09 per unit of volatility. If you would invest  1,946  in Li Auto on August 30, 2024 and sell it today you would earn a total of  385.00  from holding Li Auto or generate 19.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Mullen Automotive  vs.  Li Auto

Mullen Automotive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mullen Automotive has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Li Auto

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Li Auto are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating forward indicators, Li Auto demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mullen Automotive and Li Auto

The main advantage of trading using opposite Mullen Automotive and Li Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mullen Automotive 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.

The idea behind Mullen Automotive and Li Auto 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.