Correlation Between Vmware and Nio Inc

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

Diversification Opportunities for Vmware and Nio Inc

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between Vmware and Nio Inc is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Vmware 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 Vmware 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 Vmware 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 Vmware i.e., Vmware and Nio Inc go up and down completely randomly.

Pair Corralation between Vmware and Nio Inc

Considering the 90-day investment horizon Vmware Inc is expected to generate 0.39 times more return on investment than Nio Inc. However, Vmware Inc is 2.55 times less risky than Nio Inc. It trades about 0.43 of its potential returns per unit of risk. Nio Inc ADR is currently generating about 0.02 per unit of risk. If you would invest  11,090  in Vmware Inc on May 19, 2022 and sell it today you would earn a total of  1,174  from holding Vmware Inc or generate 10.59% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Vmware Inc  vs.  Nio Inc ADR

 Performance (%) 
       Timeline  
Vmware Inc 
Vmware Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Vmware Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady primary indicators, Vmware showed solid returns over the last few months and may actually be approaching a breakup point.

Vmware Price Channel

Nio Inc ADR 
Nio Inc Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Nio Inc ADR are ranked lower than 7 (%) 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

Vmware and Nio Inc Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vmware and Nio Inc

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

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 Stock Screener module to find equities using custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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