Correlation Between Nio and Xpeng

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

By analyzing existing cross correlation between Nio Class A and Xpeng Inc, you can compare the effects of market volatilities on Nio and Xpeng 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 Nio with a short position of Xpeng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nio and Xpeng.

Diversification Opportunities for Nio and Xpeng

0.84

Correlation Coefficient

Nio  Xpeng

Very poor diversification

The 3 months correlation between Nio and Xpeng is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Nio Class A and Xpeng Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xpeng Inc and Nio 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 Nio Class A are associated (or correlated) with Xpeng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xpeng Inc has no effect on the direction of Nio i.e., Nio and Xpeng go up and down completely randomly.

Pair Corralation between Nio and Xpeng

Considering the 90-day investment horizon Nio Class A is expected to generate 0.89 times more return on investment than Xpeng. However, Nio Class A is 1.12 times less risky than Xpeng. It trades about 0.05 of its potential returns per unit of risk. Xpeng Inc is currently generating about 0.04 per unit of risk. If you would invest  533.00  in Nio Class A on February 3, 2024 and sell it today you would earn a total of  26.00  from holding Nio Class A or generate 4.88% return on investment over 90 days.

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

Nio Class A  vs.  Xpeng Inc

Nio Class A

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nio Class A are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Nio may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Xpeng Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xpeng Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical and fundamental indicators, Xpeng showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nio and Xpeng

The main advantage of trading using opposite Nio and Xpeng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nio position performs unexpectedly, Xpeng 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 Xpeng will offset losses from the drop in Xpeng's long position.

The idea behind Nio Class A and Xpeng Inc 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.