Correlation Between Ford and Nio
Can any of the company-specific risk be diversified away by investing in both Ford and Nio 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 Ford and Nio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Nio Class A, you can compare the effects of market volatilities on Ford and Nio 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 Ford with a short position of Nio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Nio.
Diversification Opportunities for Ford and Nio
Excellent diversification
The 3 months correlation between Ford and Nio is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Nio Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nio Class A and Ford 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 Ford Motor are associated (or correlated) with Nio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nio Class A has no effect on the direction of Ford i.e., Ford and Nio go up and down completely randomly.
Pair Corralation between Ford and Nio
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.53 times more return on investment than Nio. However, Ford Motor is 1.88 times less risky than Nio. It trades about 0.02 of its potential returns per unit of risk. Nio Class A is currently generating about -0.03 per unit of risk. If you would invest 1,156 in Ford Motor on January 27, 2024 and sell it today you would earn a total of 148.00 from holding Ford Motor or generate 12.8% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Ford Motor vs. Nio Class A
Performance |
Timeline |
Ford Motor |
Nio Class A |
Ford and Nio Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ford and Nio
The main advantage of trading using opposite Ford and Nio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Nio 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 Nio will offset losses from the drop in Nio's long position.Ford vs. Hycroft Mining Holding | Ford vs. Imperial Petroleum | Ford vs. Exela Technologies | Ford vs. Camber Energy |
Nio vs. Hycroft Mining Holding | Nio vs. Imperial Petroleum | Nio vs. Exela Technologies | Nio vs. Camber Energy |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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