Correlation Between Nio and GreenPower
Can any of the company-specific risk be diversified away by investing in both Nio and GreenPower 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 GreenPower 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 GreenPower Motor, you can compare the effects of market volatilities on Nio and GreenPower 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 GreenPower. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nio and GreenPower.
Diversification Opportunities for Nio and GreenPower
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nio and GreenPower is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Nio Class A and GreenPower Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenPower Motor 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 GreenPower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenPower Motor has no effect on the direction of Nio i.e., Nio and GreenPower go up and down completely randomly.
Pair Corralation between Nio and GreenPower
Considering the 90-day investment horizon Nio Class A is expected to under-perform the GreenPower. But the stock apears to be less risky and, when comparing its historical volatility, Nio Class A is 1.35 times less risky than GreenPower. The stock trades about -0.03 of its potential returns per unit of risk. The GreenPower Motor is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 222.00 in GreenPower Motor on September 3, 2024 and sell it today you would lose (123.00) from holding GreenPower Motor or give up 55.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nio Class A vs. GreenPower Motor
Performance |
| Timeline |
| Nio Class A |
| GreenPower Motor |
Nio and GreenPower Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nio and GreenPower
The main advantage of trading using opposite Nio and GreenPower positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nio position performs unexpectedly, GreenPower 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 GreenPower will offset losses from the drop in GreenPower's long position.The idea behind Nio Class A and GreenPower Motor 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.| GreenPower vs. Phoenix Motor Common | GreenPower vs. Envirotech Vehicles | GreenPower vs. Volcon Inc | GreenPower vs. Zapp Electric Vehicles |
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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