Correlation Between Magna International and Nio

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

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

Diversification Opportunities for Magna International and Nio

-0.23

Correlation Coefficient

Magna International  Nio

Very good diversification

The 3 months correlation between Magna and Nio is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Magna International 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 Magna International 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 Magna International 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 Magna International i.e., Magna International and Nio go up and down completely randomly.

Pair Corralation between Magna International and Nio

Considering the 90-day investment horizon Magna International is expected to under-perform the Nio. But the stock apears to be less risky and, when comparing its historical volatility, Magna International is 1.96 times less risky than Nio. The stock trades about -0.07 of its potential returns per unit of risk. The Nio Class A is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  469.00  in Nio Class A on December 26, 2024 and sell it today you would lose (47.00) from holding Nio Class A or give up 10.02% of portfolio value over 90 days.

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

Magna International  vs.  Nio Class A

Magna International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Magna International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Nio Class A

Risk-Adjusted Performance

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 very healthy forward indicators, Nio is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Magna International and Nio

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