Correlation Between Tesla and Nio

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Can any of the company-specific risk be diversified away by investing in both Tesla 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 Tesla and Nio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and Nio Class A, you can compare the effects of market volatilities on Tesla 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 Tesla with a short position of Nio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Nio.

Diversification Opportunities for Tesla and Nio

-0.28
  Correlation Coefficient

Very good diversification

The 3 months correlation between Tesla and Nio is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc 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 Tesla 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 Tesla Inc 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 Tesla i.e., Tesla and Nio go up and down completely randomly.

Pair Corralation between Tesla and Nio

Given the investment horizon of 90 days Tesla Inc is expected to generate 0.92 times more return on investment than Nio. However, Tesla Inc is 1.09 times less risky than Nio. It trades about 0.19 of its potential returns per unit of risk. Nio Class A is currently generating about 0.05 per unit of risk. If you would invest  21,060  in Tesla Inc on September 1, 2024 and sell it today you would earn a total of  13,456  from holding Tesla Inc or generate 63.89% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Tesla Inc  vs.  Nio Class A

 Performance 
       Timeline  
Tesla Inc 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal essential indicators, Tesla sustained solid returns over the last few months and may actually be approaching a breakup point.
Nio Class A 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
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.

Tesla and Nio Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Tesla and Nio

The main advantage of trading using opposite Tesla and Nio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla 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 Tesla Inc 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.
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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