Correlation Between General Electric and Nio
Can any of the company-specific risk be diversified away by investing in both General Electric 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 General Electric and Nio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Electric and Nio Class A, you can compare the effects of market volatilities on General Electric 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 General Electric with a short position of Nio. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Electric and Nio.
Diversification Opportunities for General Electric and Nio
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between General and Nio is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding General Electric 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 General Electric 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 General Electric 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 General Electric i.e., General Electric and Nio go up and down completely randomly.
Pair Corralation between General Electric and Nio
Allowing for the 90-day total investment horizon General Electric is expected to generate 0.47 times more return on investment than Nio. However, General Electric is 2.13 times less risky than Nio. It trades about 0.33 of its potential returns per unit of risk. Nio Class A is currently generating about -0.22 per unit of risk. If you would invest 15,561 in General Electric on December 30, 2023 and sell it today you would earn a total of 1,992 from holding General Electric or generate 12.8% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
General Electric vs. Nio Class A
Performance |
Timeline |
General Electric |
Nio Class A |
General Electric and Nio Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with General Electric and Nio
The main advantage of trading using opposite General Electric and Nio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Electric 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.General Electric vs. Barnes Group | General Electric vs. Babcock Wilcox Enterprises | General Electric vs. Crane Company | General Electric vs. Hillenbrand |
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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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