Correlation Between Bed Bath and Nio

Can any of the company-specific risk be diversified away by investing in both Bed Bath 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 Bed Bath and Nio into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bed Bath Beyond and Nio Class A, you can compare the effects of market volatilities on Bed Bath 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 Bed Bath with a short position of Nio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bed Bath and Nio.

Diversification Opportunities for Bed Bath and Nio

0.09

Correlation Coefficient

Bed Bath  Nio

Significant diversification

The 3 months correlation between Bed and Nio is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Bed Bath Beyond 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 Bed Bath 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 Bed Bath Beyond 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 Bed Bath i.e., Bed Bath and Nio go up and down completely randomly.

Pair Corralation between Bed Bath and Nio

Given the investment horizon of 90 days Bed Bath Beyond is expected to under-perform the Nio. In addition to that, Bed Bath is 3.74 times more volatile than Nio Class A. It trades about -0.04 of its total potential returns per unit of risk. Nio Class A is currently generating about -0.05 per unit of volatility. If you would invest  939.00  in Nio Class A on January 24, 2024 and sell it today you would lose (539.00) from holding Nio Class A or give up 57.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	30.45%
Values	Daily Returns

Bed Bath Beyond  vs.  Nio Class A

Bed Bath Beyond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bed Bath Beyond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Bed Bath is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Nio Class A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nio Class A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Bed Bath and Nio

The main advantage of trading using opposite Bed Bath and Nio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bed Bath 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.

The idea behind Bed Bath Beyond and Nio Class A 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.

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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.