Correlation Between Educational Development and Nio

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

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

Diversification Opportunities for Educational Development and Nio

0.82

Correlation Coefficient

Educational Development  Nio

Very poor diversification

The 3 months correlation between Educational and Nio is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Educational Development 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 Educational Development 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 Educational Development 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 Educational Development i.e., Educational Development and Nio go up and down completely randomly.

Pair Corralation between Educational Development and Nio

Given the investment horizon of 90 days Educational Development is expected to generate 0.59 times more return on investment than Nio. However, Educational Development is 1.7 times less risky than Nio. It trades about -0.16 of its potential returns per unit of risk. Nio Class A is currently generating about -0.15 per unit of risk. If you would invest  213.00  in Educational Development on October 5, 2024 and sell it today you would lose (48.00) from holding Educational Development or give up 22.54% of portfolio value over 90 days.

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

Educational Development  vs.  Nio Class A

Educational Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Educational Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 Educational Development and Nio

The main advantage of trading using opposite Educational Development and Nio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Educational Development 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 Educational Development 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.