Correlation Between Volcon and Nio

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

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

Diversification Opportunities for Volcon and Nio

0.08

Correlation Coefficient

Volcon  Nio

Significant diversification

The 3 months correlation between Volcon and Nio is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Volcon 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 Volcon 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 Volcon 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 Volcon i.e., Volcon and Nio go up and down completely randomly.

Pair Corralation between Volcon and Nio

Given the investment horizon of 90 days Volcon Inc is expected to under-perform the Nio. In addition to that, Volcon is 1.43 times more volatile than Nio Class A. It trades about -0.16 of its total potential returns per unit of risk. Nio Class A is currently generating about 0.04 per unit of volatility. If you would invest  424.00  in Nio Class A on September 4, 2024 and sell it today you would earn a total of  16.00  from holding Nio Class A or generate 3.77% return on investment over 90 days.

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

Volcon Inc  vs.  Nio Class A

Volcon Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volcon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Nio Class A

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nio Class A are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent forward indicators, Nio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Volcon and Nio

The main advantage of trading using opposite Volcon and Nio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volcon 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 Volcon 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.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.