Correlation Between Ferrari NV and Nio

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

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

Diversification Opportunities for Ferrari NV and Nio

-0.03

Correlation Coefficient

Ferrari NV  Nio

Good diversification

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

Pair Corralation between Ferrari NV and Nio

Given the investment horizon of 90 days Ferrari NV is expected to under-perform the Nio. But the stock apears to be less risky and, when comparing its historical volatility, Ferrari NV is 3.12 times less risky than Nio. The stock trades about -0.13 of its potential returns per unit of risk. The Nio Class A is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  404.00  in Nio Class A on August 30, 2024 and sell it today you would earn a total of  34.00  from holding Nio Class A or generate 8.42% return on investment over 90 days.

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

Ferrari NV  vs.  Nio Class A

Ferrari NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ferrari NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 unfluctuating forward indicators, Nio displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ferrari NV and Nio

The main advantage of trading using opposite Ferrari NV and Nio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ferrari NV 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 Ferrari NV 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..