Correlation Between Xpeng and Ferrari NV

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

By analyzing existing cross correlation between Xpeng Inc and Ferrari NV, you can compare the effects of market volatilities on Xpeng and Ferrari NV 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 Xpeng with a short position of Ferrari NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xpeng and Ferrari NV.

Diversification Opportunities for Xpeng and Ferrari NV

-0.03

Correlation Coefficient

Xpeng  Ferrari NV

Good diversification

The 3 months correlation between Xpeng and Ferrari is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Xpeng Inc and Ferrari NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrari NV and Xpeng 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 Xpeng Inc are associated (or correlated) with Ferrari NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrari NV has no effect on the direction of Xpeng i.e., Xpeng and Ferrari NV go up and down completely randomly.

Pair Corralation between Xpeng and Ferrari NV

Given the investment horizon of 90 days Xpeng Inc is expected to generate 2.97 times more return on investment than Ferrari NV. However, Xpeng is 2.97 times more volatile than Ferrari NV. It trades about 0.09 of its potential returns per unit of risk. Ferrari NV is currently generating about 0.0 per unit of risk. If you would invest  759.00  in Xpeng Inc on February 2, 2024 and sell it today you would earn a total of  53.00  from holding Xpeng Inc or generate 6.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Xpeng Inc  vs.  Ferrari NV

Xpeng Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xpeng Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical and fundamental indicators, Xpeng is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Ferrari NV

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ferrari NV are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Ferrari NV may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Xpeng and Ferrari NV

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

The idea behind Xpeng Inc and Ferrari NV 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.

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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.