Correlation Between Tesla and Nio
Can any of the company-specific risk be diversified away by investing in both Tesla and Nio 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 Tesla and Nio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and Nio Class A, you can compare the effects of market volatilities on Tesla and Nio 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 Tesla with a short position of Nio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Nio.
Diversification Opportunities for Tesla and Nio
Pay attention - limited upside
The 3 months correlation between Tesla and Nio is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Nio Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nio Class A and Tesla 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 Tesla Inc are associated (or correlated) with Nio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nio Class A has no effect on the direction of Tesla i.e., Tesla and Nio go up and down completely randomly.
Pair Corralation between Tesla and Nio
Given the investment horizon of 90 days Tesla Inc is expected to generate 0.94 times more return on investment than Nio. However, Tesla Inc is 1.06 times less risky than Nio. It trades about 0.09 of its potential returns per unit of risk. Nio Class A is currently generating about -0.01 per unit of risk. If you would invest 20,783 in Tesla Inc on October 20, 2024 and sell it today you would earn a total of 21,867 from holding Tesla Inc or generate 105.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tesla Inc vs. Nio Class A
Performance |
| Timeline |
| Tesla Inc |
| Nio Class A |
Tesla and Nio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and Nio
The main advantage of trading using opposite Tesla and Nio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, Nio 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 Nio will offset losses from the drop in Nio's long position.| Tesla vs. Canoo Inc | Tesla vs. Aquagold International | Tesla vs. Morningstar Unconstrained Allocation | Tesla vs. Via Renewables |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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