Correlation Between Nio and ECARX Holdings

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

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

Diversification Opportunities for Nio and ECARX Holdings

-0.1

Correlation Coefficient

Nio  ECARX Holdings

Good diversification

The 3 months correlation between Nio and ECARX is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Nio Class A and ECARX Holdings Warrants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECARX Holdings Warrants and Nio 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 Nio Class A are associated (or correlated) with ECARX Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECARX Holdings Warrants has no effect on the direction of Nio i.e., Nio and ECARX Holdings go up and down completely randomly.

Pair Corralation between Nio and ECARX Holdings

Considering the 90-day investment horizon Nio Class A is expected to under-perform the ECARX Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Nio Class A is 5.49 times less risky than ECARX Holdings. The stock trades about -0.17 of its potential returns per unit of risk. The ECARX Holdings Warrants is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1.76  in ECARX Holdings Warrants on September 4, 2024 and sell it today you would earn a total of  0.25  from holding ECARX Holdings Warrants or generate 14.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	38.1%
Values	Daily Returns

Nio Class A  vs.  ECARX Holdings Warrants

Nio Class A

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nio Class A are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent forward indicators, Nio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ECARX Holdings Warrants

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ECARX Holdings Warrants are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, ECARX Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nio and ECARX Holdings

The main advantage of trading using opposite Nio and ECARX Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nio position performs unexpectedly, ECARX Holdings 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 ECARX Holdings will offset losses from the drop in ECARX Holdings' long position.

The idea behind Nio Class A and ECARX Holdings Warrants 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.