Correlation Between Ferrari NV and Xpeng

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

By analyzing existing cross correlation between Ferrari NV and Xpeng Inc, you can compare the effects of market volatilities on Ferrari NV and Xpeng 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 Xpeng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ferrari NV and Xpeng.

Diversification Opportunities for Ferrari NV and Xpeng

0.37

Correlation Coefficient

Ferrari NV  Xpeng

Weak diversification

The 3 months correlation between Ferrari and Xpeng is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ferrari NV and Xpeng Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xpeng Inc 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 Xpeng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xpeng Inc has no effect on the direction of Ferrari NV i.e., Ferrari NV and Xpeng go up and down completely randomly.

Pair Corralation between Ferrari NV and Xpeng

Given the investment horizon of 90 days Ferrari NV is expected to generate 46.14 times less return on investment than Xpeng. But when comparing it to its historical volatility, Ferrari NV is 2.38 times less risky than Xpeng. It trades about 0.01 of its potential returns per unit of risk. Xpeng Inc is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,187  in Xpeng Inc on December 29, 2024 and sell it today you would earn a total of  783.00  from holding Xpeng Inc or generate 65.96% return on investment over 90 days.

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

Ferrari NV  vs.  Xpeng Inc

Ferrari NV

Risk-Adjusted Performance

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 rather sound fundamental indicators, Ferrari NV is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Xpeng Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xpeng Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Xpeng showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ferrari NV and Xpeng

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

The idea behind Ferrari NV and Xpeng Inc 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.