Correlation Between AYRO and NWTN
Can any of the company-specific risk be diversified away by investing in both AYRO and NWTN 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 AYRO and NWTN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AYRO Inc and NWTN Class B, you can compare the effects of market volatilities on AYRO and NWTN 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 AYRO with a short position of NWTN. Check out your portfolio center. Please also check ongoing floating volatility patterns of AYRO and NWTN.
Diversification Opportunities for AYRO and NWTN
Good diversification
The 3 months correlation between AYRO and NWTN is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding AYRO Inc and NWTN Class B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NWTN Class B and AYRO 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 AYRO Inc are associated (or correlated) with NWTN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NWTN Class B has no effect on the direction of AYRO i.e., AYRO and NWTN go up and down completely randomly.
Pair Corralation between AYRO and NWTN
Given the investment horizon of 90 days AYRO Inc is expected to under-perform the NWTN. But the stock apears to be less risky and, when comparing its historical volatility, AYRO Inc is 6.42 times less risky than NWTN. The stock trades about -0.1 of its potential returns per unit of risk. The NWTN Class B is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 99.00 in NWTN Class B on August 27, 2024 and sell it today you would earn a total of 30.00 from holding NWTN Class B or generate 30.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AYRO Inc vs. NWTN Class B
Performance |
| Timeline |
| AYRO Inc |
| NWTN Class B |
AYRO and NWTN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AYRO and NWTN
The main advantage of trading using opposite AYRO and NWTN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AYRO position performs unexpectedly, NWTN 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 NWTN will offset losses from the drop in NWTN's long position.The idea behind AYRO Inc and NWTN Class B 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.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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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