Correlation Between Nio and Thor Industries

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

Diversification Opportunities for Nio and Thor Industries

-0.07

Correlation Coefficient

Nio  Thor Industries

Good diversification

The 3 months correlation between Nio and Thor is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Nio Class A and Thor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thor Industries 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 Thor Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thor Industries has no effect on the direction of Nio i.e., Nio and Thor Industries go up and down completely randomly.

Pair Corralation between Nio and Thor Industries

Considering the 90-day investment horizon Nio Class A is expected to under-perform the Thor Industries. In addition to that, Nio is 1.95 times more volatile than Thor Industries. It trades about -0.04 of its total potential returns per unit of risk. Thor Industries is currently generating about 0.03 per unit of volatility. If you would invest  9,488  in Thor Industries on September 3, 2024 and sell it today you would earn a total of  1,607  from holding Thor Industries or generate 16.94% return on investment over 90 days.

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

Nio Class A  vs.  Thor Industries

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

Thor Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Thor Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical indicators, Thor Industries may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nio and Thor Industries

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

The idea behind Nio Class A and Thor Industries 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.