Correlation Between Nio and Volkswagen
Can any of the company-specific risk be diversified away by investing in both Nio and Volkswagen 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 Volkswagen 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 Volkswagen AG VZO, you can compare the effects of market volatilities on Nio and Volkswagen 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 Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nio and Volkswagen.
Diversification Opportunities for Nio and Volkswagen
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Nio and Volkswagen is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Nio Class A and Volkswagen AG VZO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG VZO 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 Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG VZO has no effect on the direction of Nio i.e., Nio and Volkswagen go up and down completely randomly.
Pair Corralation between Nio and Volkswagen
Considering the 90-day investment horizon Nio Class A is expected to under-perform the Volkswagen. In addition to that, Nio is 2.48 times more volatile than Volkswagen AG VZO. It trades about -0.53 of its total potential returns per unit of risk. Volkswagen AG VZO is currently generating about 0.11 per unit of volatility. If you would invest 12,340 in Volkswagen AG VZO on January 18, 2024 and sell it today you would earn a total of 361.00 from holding Volkswagen AG VZO or generate 2.93% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Nio Class A vs. Volkswagen AG VZO
Performance |
Timeline |
Nio Class A |
Volkswagen AG VZO |
Nio and Volkswagen Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Nio and Volkswagen
The main advantage of trading using opposite Nio and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nio position performs unexpectedly, Volkswagen 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 Volkswagen will offset losses from the drop in Volkswagen's long position.Nio vs. Hycroft Mining Holding | Nio vs. Exela Technologies | Nio vs. Aquagold International | Nio vs. Thrivent High Yield |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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