Correlation Between Nio and GM

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

Diversification Opportunities for Nio and GM

-0.02

Correlation Coefficient

Nio  GM

Good diversification

The 3 months correlation between Nio and GM is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Nio Class A and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors 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 GM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of Nio i.e., Nio and GM go up and down completely randomly.

Pair Corralation between Nio and GM

Considering the 90-day investment horizon Nio Class A is expected to generate 1.7 times more return on investment than GM. However, Nio is 1.7 times more volatile than General Motors. It trades about 0.0 of its potential returns per unit of risk. General Motors is currently generating about -0.02 per unit of risk. If you would invest  469.00  in Nio Class A on December 25, 2024 and sell it today you would lose (19.00) from holding Nio Class A or give up 4.05% of portfolio value over 90 days.

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

Nio Class A  vs.  General Motors

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.

General Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Nio and GM

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

The idea behind Nio Class A and General Motors 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.