Correlation Between Nio Inc and Faraday Future

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

Diversification Opportunities for Nio Inc and Faraday Future

0.51
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Nio Inc and Faraday is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Nio Inc ADR and Faraday Future Intelligent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faraday Future Intel and Nio Inc 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 Inc ADR are associated (or correlated) with Faraday Future. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faraday Future Intel has no effect on the direction of Nio Inc i.e., Nio Inc and Faraday Future go up and down completely randomly.

Pair Corralation between Nio Inc and Faraday Future

Considering the 90-day investment horizon Nio Inc ADR is expected to generate 0.4 times more return on investment than Faraday Future. However, Nio Inc ADR is 2.52 times less risky than Faraday Future. It trades about -0.11 of its potential returns per unit of risk. Faraday Future Intelligent is currently generating about -0.26 per unit of risk. If you would invest  2,218  in Nio Inc ADR on July 2, 2022 and sell it today you would lose (641.00)  from holding Nio Inc ADR or give up 28.9% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Nio Inc ADR  vs.  Faraday Future Intelligent

 Performance (%) 
       Timeline  
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 conflicting performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in October 2022. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Nio Inc Price Channel

Faraday Future Intel 
Faraday Performance
0 of 100
Over the last 90 days Faraday Future Intelligent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in October 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Faraday Price Channel

Nio Inc and Faraday Future Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nio Inc and Faraday Future

The main advantage of trading using opposite Nio Inc and Faraday Future positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nio Inc position performs unexpectedly, Faraday Future 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 Faraday Future will offset losses from the drop in Faraday Future's long position.
Nio Inc vs. Amazon Inc
The idea behind Nio Inc ADR and Faraday Future Intelligent 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.
Faraday Future vs. Amazon 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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