Correlation Between KEYCORP and Li Auto

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

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

Diversification Opportunities for KEYCORP and Li Auto

0.27

Correlation Coefficient

KEYCORP  Li Auto

Modest diversification

The 3 months correlation between KEYCORP and Li Auto is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding KEYCORP MEDIUM TERM and Li Auto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Auto and KEYCORP 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 KEYCORP MEDIUM TERM 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 KEYCORP i.e., KEYCORP and Li Auto go up and down completely randomly.

Pair Corralation between KEYCORP and Li Auto

Assuming the 90 days trading horizon KEYCORP MEDIUM TERM is expected to under-perform the Li Auto. But the bond apears to be less risky and, when comparing its historical volatility, KEYCORP MEDIUM TERM is 4.87 times less risky than Li Auto. The bond trades about -0.01 of its potential returns per unit of risk. The Li Auto is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,098  in Li Auto on September 24, 2024 and sell it today you would earn a total of  258.00  from holding Li Auto or generate 12.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

KEYCORP MEDIUM TERM  vs.  Li Auto

KEYCORP MEDIUM TERM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KEYCORP MEDIUM TERM has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KEYCORP is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Li Auto

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Li Auto has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Li Auto is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with KEYCORP and Li Auto

The main advantage of trading using opposite KEYCORP and Li Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KEYCORP 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 KEYCORP MEDIUM TERM 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.