Correlation Between Mahindra Mahindra and Nio

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

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

Diversification Opportunities for Mahindra Mahindra and Nio

0.03

Correlation Coefficient

Mahindra Mahindra  Nio

Significant diversification

The 3 months correlation between Mahindra and Nio is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Mahindra Mahindra Limited 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 Mahindra Mahindra 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 Mahindra Mahindra Limited 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 Mahindra Mahindra i.e., Mahindra Mahindra and Nio go up and down completely randomly.

Pair Corralation between Mahindra Mahindra and Nio

Assuming the 90 days horizon Mahindra Mahindra Limited is expected to generate 0.75 times more return on investment than Nio. However, Mahindra Mahindra Limited is 1.34 times less risky than Nio. It trades about -0.04 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  3,496  in Mahindra Mahindra Limited on October 24, 2024 and sell it today you would lose (324.00) from holding Mahindra Mahindra Limited or give up 9.27% of portfolio value over 90 days.

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

Mahindra Mahindra Limited  vs.  Nio Class A

Mahindra Mahindra

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mahindra Mahindra Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 Mahindra Mahindra and Nio

The main advantage of trading using opposite Mahindra Mahindra and Nio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mahindra Mahindra 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 Mahindra Mahindra Limited 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.