Correlation Between Nio and Standard Bank

Can any of the company-specific risk be diversified away by investing in both Nio and Standard Bank 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 and Standard Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nio Class A and Standard Bank Group, you can compare the effects of market volatilities on Nio and Standard Bank 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 with a short position of Standard Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nio and Standard Bank.

Diversification Opportunities for Nio and Standard Bank

0.59

Correlation Coefficient

Nio  Standard Bank

Very weak diversification

The 3 months correlation between Nio and Standard is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Nio Class A and Standard Bank Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Bank Group and Nio 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 Class A are associated (or correlated) with Standard Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Bank Group has no effect on the direction of Nio i.e., Nio and Standard Bank go up and down completely randomly.

Pair Corralation between Nio and Standard Bank

Considering the 90-day investment horizon Nio Class A is expected to generate 2.63 times more return on investment than Standard Bank. However, Nio is 2.63 times more volatile than Standard Bank Group. It trades about 0.03 of its potential returns per unit of risk. Standard Bank Group is currently generating about 0.04 per unit of risk. If you would invest  444.00  in Nio Class A on September 22, 2024 and sell it today you would earn a total of  10.00  from holding Nio Class A or generate 2.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Nio Class A  vs.  Standard Bank Group

Nio Class A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nio Class A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Standard Bank Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Standard Bank Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Nio and Standard Bank

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

The idea behind Nio Class A and Standard Bank Group 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.

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 the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.