Correlation Between Nio and Lotus Technology
Can any of the company-specific risk be diversified away by investing in both Nio and Lotus Technology 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 Lotus Technology 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 Lotus Technology American, you can compare the effects of market volatilities on Nio and Lotus Technology 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 Lotus Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nio and Lotus Technology.
Diversification Opportunities for Nio and Lotus Technology
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nio and Lotus is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Nio Class A and Lotus Technology American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Technology American 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 Lotus Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Technology American has no effect on the direction of Nio i.e., Nio and Lotus Technology go up and down completely randomly.
Pair Corralation between Nio and Lotus Technology
Considering the 90-day investment horizon Nio Class A is expected to generate 1.6 times more return on investment than Lotus Technology. However, Nio is 1.6 times more volatile than Lotus Technology American. It trades about -0.03 of its potential returns per unit of risk. Lotus Technology American is currently generating about -0.35 per unit of risk. If you would invest 506.00 in Nio Class A on September 12, 2024 and sell it today you would lose (29.00) from holding Nio Class A or give up 5.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Nio Class A vs. Lotus Technology American
Performance |
| Timeline |
| Nio Class A |
| Lotus Technology American |
Nio and Lotus Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nio and Lotus Technology
The main advantage of trading using opposite Nio and Lotus Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nio position performs unexpectedly, Lotus Technology 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 Lotus Technology will offset losses from the drop in Lotus Technology's long position.The idea behind Nio Class A and Lotus Technology American 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.| Lotus Technology vs. Universal | Lotus Technology vs. The Coca Cola | Lotus Technology vs. Guangdong Investment Limited | Lotus Technology vs. Diageo PLC ADR |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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