Correlation Between Allena Pharmaceuticals and Nio Inc

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

Diversification Opportunities for Allena Pharmaceuticals and Nio Inc

0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Allena and Nio Inc is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Allena Pharmaceuticals and Nio Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nio Inc ADR and Allena Pharmaceuticals 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 Allena Pharmaceuticals are associated (or correlated) with Nio Inc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nio Inc ADR has no effect on the direction of Allena Pharmaceuticals i.e., Allena Pharmaceuticals and Nio Inc go up and down completely randomly.

Pair Corralation between Allena Pharmaceuticals and Nio Inc

Given the investment horizon of 90 days Allena Pharmaceuticals is expected to generate 4.23 times more return on investment than Nio Inc. However, Allena Pharmaceuticals is 4.23 times more volatile than Nio Inc ADR. It trades about 0.06 of its potential returns per unit of risk. Nio Inc ADR is currently generating about 0.05 per unit of risk. If you would invest  14.00  in Allena Pharmaceuticals on May 11, 2022 and sell it today you would lose (1.00)  from holding Allena Pharmaceuticals or give up 7.14% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Allena Pharmaceuticals  vs.  Nio Inc ADR

 Performance (%) 
       Timeline  
Allena Pharmaceuticals 
Allena Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Allena Pharmaceuticals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Allena Pharmaceuticals sustained solid returns over the last few months and may actually be approaching a breakup point.

Allena Price Channel

Nio Inc ADR 
Nio Inc Performance
12 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Nio Inc ADR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Nio Inc disclosed solid returns over the last few months and may actually be approaching a breakup point.

Nio Inc Price Channel

Allena Pharmaceuticals and Nio Inc Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Allena Pharmaceuticals and Nio Inc

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

Allena Pharmaceuticals

Pair trading matchups for Allena Pharmaceuticals

The idea behind Allena Pharmaceuticals and Nio Inc ADR 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.

Nio Inc ADR

Pair trading matchups for Nio Inc

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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