Correlation Between Nio and Ford

Can any of the company-specific risk be diversified away by investing in both Nio and Ford 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 Ford 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 Ford Motor, you can compare the effects of market volatilities on Nio and Ford 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 Ford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nio and Ford.

Diversification Opportunities for Nio and Ford

-0.56

Correlation Coefficient

Nio  Ford

Excellent diversification

The 3 months correlation between Nio and Ford is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Nio Class A and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor 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 Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Nio i.e., Nio and Ford go up and down completely randomly.

Pair Corralation between Nio and Ford

Considering the 90-day investment horizon Nio Class A is expected to generate 2.55 times more return on investment than Ford. However, Nio is 2.55 times more volatile than Ford Motor. It trades about 0.05 of its potential returns per unit of risk. Ford Motor is currently generating about 0.03 per unit of risk. If you would invest  415.00  in Nio Class A on September 1, 2024 and sell it today you would earn a total of  33.00  from holding Nio Class A or generate 7.95% return on investment over 90 days.

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

Nio Class A  vs.  Ford Motor

Nio Class A

Risk-Adjusted Performance

3 of 100

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.

Ford Motor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nio and Ford

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

The idea behind Nio Class A and Ford Motor 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.