Correlation Between Nio and Hycroft Mining

Can any of the company-specific risk be diversified away by investing in both Nio and Hycroft Mining 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 Hycroft Mining 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 Hycroft Mining Holding, you can compare the effects of market volatilities on Nio and Hycroft Mining 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 Hycroft Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nio and Hycroft Mining.

Diversification Opportunities for Nio and Hycroft Mining

-0.86

Correlation Coefficient

Nio  Hycroft Mining

Pay attention - limited upside

The 3 months correlation between Nio and Hycroft is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Nio Class A and Hycroft Mining Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hycroft Mining Holding 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 Hycroft Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hycroft Mining Holding has no effect on the direction of Nio i.e., Nio and Hycroft Mining go up and down completely randomly.

Pair Corralation between Nio and Hycroft Mining

Considering the 90-day investment horizon Nio Class A is expected to under-perform the Hycroft Mining. But the stock apears to be less risky and, when comparing its historical volatility, Nio Class A is 2.19 times less risky than Hycroft Mining. The stock trades about -0.02 of its potential returns per unit of risk. The Hycroft Mining Holding is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  275.00  in Hycroft Mining Holding on January 30, 2024 and sell it today you would earn a total of  96.98  from holding Hycroft Mining Holding or generate 35.27% return on investment over 90 days.

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

Nio Class A  vs.  Hycroft Mining Holding

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 inconsistent performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Hycroft Mining Holding

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hycroft Mining Holding are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Hycroft Mining exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nio and Hycroft Mining

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

The idea behind Nio Class A and Hycroft Mining Holding 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.