Correlation Between Zotye Automobile and Nio

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

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

Diversification Opportunities for Zotye Automobile and Nio

-0.74

Correlation Coefficient

Zotye Automobile  Nio

Pay attention - limited upside

The 3 months correlation between Zotye and Nio is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Zotye Automobile Co 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 Zotye Automobile 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 Zotye Automobile Co 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 Zotye Automobile i.e., Zotye Automobile and Nio go up and down completely randomly.

Pair Corralation between Zotye Automobile and Nio

Assuming the 90 days trading horizon Zotye Automobile Co is expected to generate 0.93 times more return on investment than Nio. However, Zotye Automobile Co is 1.07 times less risky than Nio. It trades about -0.01 of its potential returns per unit of risk. Nio Class A is currently generating about -0.02 per unit of risk. If you would invest  441.00  in Zotye Automobile Co on October 5, 2024 and sell it today you would lose (206.00) from holding Zotye Automobile Co or give up 46.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.85%
Values	Daily Returns

Zotye Automobile Co  vs.  Nio Class A

Zotye Automobile

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zotye Automobile Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zotye Automobile sustained solid returns over the last few months and may actually be approaching a breakup point.

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 February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Zotye Automobile and Nio

The main advantage of trading using opposite Zotye Automobile and Nio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zotye Automobile 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 Zotye Automobile Co 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.