Correlation Between Philip Morris and Nio Inc

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

Diversification Opportunities for Philip Morris and Nio Inc

0.39
  Correlation Coefficient

Weak diversification

The 3 months correlation between Philip and Nio Inc is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International 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 Philip Morris 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 Philip Morris International 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 Philip Morris i.e., Philip Morris and Nio Inc go up and down completely randomly.

Pair Corralation between Philip Morris and Nio Inc

Allowing for the 90-day total investment horizon Philip Morris International is expected to under-perform the Nio Inc. But the stock apears to be less risky and, when comparing its historical volatility, Philip Morris International is 2.8 times less risky than Nio Inc. The stock trades about -0.25 of its potential returns per unit of risk. The Nio Inc ADR is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,711  in Nio Inc ADR on July 5, 2022 and sell it today you would lose (162.00)  from holding Nio Inc ADR or give up 9.47% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Philip Morris International  vs.  Nio Inc ADR

 Performance (%) 
       Timeline  
Philip Morris Intern 
Philip Performance
0 of 100
Over the last 90 days Philip Morris International has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's primary indicators remain relatively steady which may send shares a bit higher in November 2022. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

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

Nio Inc Price Channel

Philip Morris and Nio Inc Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Philip Morris and Nio Inc

The main advantage of trading using opposite Philip Morris and Nio Inc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Philip Morris 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.
Philip Morris vs. Amazon Inc
The idea behind Philip Morris International 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 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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