Correlation Between Amazon and Nio Inc

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

Diversification Opportunities for Amazon and Nio Inc

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Amazon and Nio Inc is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc 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 Amazon 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 Amazon Inc 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 Amazon i.e., Amazon and Nio Inc go up and down completely randomly.

Pair Corralation between Amazon and Nio Inc

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.48 times more return on investment than Nio Inc. However, Amazon Inc is 2.07 times less risky than Nio Inc. It trades about -0.03 of its potential returns per unit of risk. Nio Inc ADR is currently generating about -0.03 per unit of risk. If you would invest  15,521  in Amazon Inc on August 31, 2022 and sell it today you would lose (6,279)  from holding Amazon Inc or give up 40.45% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Amazon Inc  vs.  Nio Inc ADR

 Performance (%) 
       Timeline  
Amazon Inc 
Amazon Performance
0 of 100
Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2022. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Amazon Price Channel

Nio Inc ADR 
Nio Inc Performance
0 of 100
Over the last 90 days Nio Inc ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in December 2022. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Nio Inc Price Channel

Amazon and Nio Inc Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and Nio Inc

The main advantage of trading using opposite Amazon and Nio Inc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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.
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The idea behind Amazon Inc 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.
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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