Correlation Between Nio and Ideanomics

Can any of the company-specific risk be diversified away by investing in both Nio and Ideanomics 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 Ideanomics 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 Ideanomics, you can compare the effects of market volatilities on Nio and Ideanomics 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 Ideanomics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nio and Ideanomics.

Diversification Opportunities for Nio and Ideanomics

0.66

Correlation Coefficient

Nio  Ideanomics

Poor diversification

The 3 months correlation between Nio and Ideanomics is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Nio Class A and Ideanomics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ideanomics 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 Ideanomics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ideanomics has no effect on the direction of Nio i.e., Nio and Ideanomics go up and down completely randomly.

Pair Corralation between Nio and Ideanomics

Considering the 90-day investment horizon Nio Class A is expected to under-perform the Ideanomics. But the stock apears to be less risky and, when comparing its historical volatility, Nio Class A is 1.41 times less risky than Ideanomics. The stock trades about -0.16 of its potential returns per unit of risk. The Ideanomics is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  92.00  in Ideanomics on January 26, 2024 and sell it today you would lose (7.00) from holding Ideanomics or give up 7.61% 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.  Ideanomics

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.

Ideanomics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Nio and Ideanomics

The main advantage of trading using opposite Nio and Ideanomics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nio position performs unexpectedly, Ideanomics 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 Ideanomics will offset losses from the drop in Ideanomics' long position.

The idea behind Nio Class A and Ideanomics 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.