Correlation Between Nio and Alstom SA
Can any of the company-specific risk be diversified away by investing in both Nio and Alstom SA 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 Alstom SA 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 Alstom SA, you can compare the effects of market volatilities on Nio and Alstom SA 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 Alstom SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nio and Alstom SA.
Diversification Opportunities for Nio and Alstom SA
Very good diversification
The 3 months correlation between Nio and Alstom is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Nio Class A and Alstom SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alstom SA 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 Alstom SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alstom SA has no effect on the direction of Nio i.e., Nio and Alstom SA go up and down completely randomly.
Pair Corralation between Nio and Alstom SA
Considering the 90-day investment horizon Nio Class A is expected to generate 0.94 times more return on investment than Alstom SA. However, Nio Class A is 1.06 times less risky than Alstom SA. It trades about -0.06 of its potential returns per unit of risk. Alstom SA is currently generating about -0.2 per unit of risk. If you would invest 454.00 in Nio Class A on October 21, 2024 and sell it today you would lose (18.00) from holding Nio Class A or give up 3.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nio Class A vs. Alstom SA
Performance |
| Timeline |
| Nio Class A |
| Alstom SA |
Nio and Alstom SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nio and Alstom SA
The main advantage of trading using opposite Nio and Alstom SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nio position performs unexpectedly, Alstom SA 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 Alstom SA will offset losses from the drop in Alstom SA's long position.The idea behind Nio Class A and Alstom SA 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.| Alstom SA vs. Guangshen Railway | Alstom SA vs. MACOM Technology Solutions | Alstom SA vs. Strategic Education | Alstom SA vs. Bill Com Holdings |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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