Correlation Between Anhui Jianghuai and Nio

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

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

Diversification Opportunities for Anhui Jianghuai and Nio

-0.71

Correlation Coefficient

Anhui Jianghuai  Nio

Pay attention - limited upside

The 3 months correlation between Anhui and Nio is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Jianghuai Automobile 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 Anhui Jianghuai 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 Anhui Jianghuai Automobile 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 Anhui Jianghuai i.e., Anhui Jianghuai and Nio go up and down completely randomly.

Pair Corralation between Anhui Jianghuai and Nio

Assuming the 90 days trading horizon Anhui Jianghuai Automobile is expected to generate 0.71 times more return on investment than Nio. However, Anhui Jianghuai Automobile is 1.41 times less risky than Nio. It trades about 0.07 of its potential returns per unit of risk. Nio Class A is currently generating about -0.05 per unit of risk. If you would invest  3,471  in Anhui Jianghuai Automobile on October 5, 2024 and sell it today you would earn a total of  131.00  from holding Anhui Jianghuai Automobile or generate 3.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Anhui Jianghuai Automobile  vs.  Nio Class A

Anhui Jianghuai Auto

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Jianghuai Automobile are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anhui Jianghuai 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 Anhui Jianghuai and Nio

The main advantage of trading using opposite Anhui Jianghuai and Nio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anhui Jianghuai 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 Anhui Jianghuai Automobile 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.