Correlation Between ECD Automotive and Nio

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

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

Diversification Opportunities for ECD Automotive and Nio

-0.17

Correlation Coefficient

ECD Automotive  Nio

Good diversification

The 3 months correlation between ECD and Nio is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding ECD Automotive Design 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 ECD Automotive 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 ECD Automotive Design 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 ECD Automotive i.e., ECD Automotive and Nio go up and down completely randomly.

Pair Corralation between ECD Automotive and Nio

Given the investment horizon of 90 days ECD Automotive Design is expected to under-perform the Nio. In addition to that, ECD Automotive is 1.16 times more volatile than Nio Class A. It trades about -0.07 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  454.00  in Nio Class A on December 17, 2024 and sell it today you would earn a total of  36.00  from holding Nio Class A or generate 7.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ECD Automotive Design  vs.  Nio Class A

ECD Automotive Design

Risk-Adjusted Performance

Very Weak

Over the last 90 days ECD Automotive Design has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Nio Class A

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nio Class A are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent forward indicators, Nio displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ECD Automotive and Nio

The main advantage of trading using opposite ECD Automotive and Nio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECD Automotive 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 ECD Automotive Design 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.