Correlation Between Canoo and Faraday Future

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

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

Diversification Opportunities for Canoo and Faraday Future

0.53

Correlation Coefficient

Canoo  Faraday Future

Very weak diversification

The 3 months correlation between Canoo and Faraday is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Canoo Inc and Faraday Future Intelligent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faraday Future Intel and Canoo 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 Canoo Inc are associated (or correlated) with Faraday Future. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faraday Future Intel has no effect on the direction of Canoo i.e., Canoo and Faraday Future go up and down completely randomly.

Pair Corralation between Canoo and Faraday Future

Given the investment horizon of 90 days Canoo Inc is expected to generate 0.67 times more return on investment than Faraday Future. However, Canoo Inc is 1.49 times less risky than Faraday Future. It trades about -0.04 of its potential returns per unit of risk. Faraday Future Intelligent is currently generating about -0.1 per unit of risk. If you would invest  6,417  in Canoo Inc on January 31, 2024 and sell it today you would lose (6,135) from holding Canoo Inc or give up 95.61% of portfolio value over 90 days.

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

Canoo Inc  vs.  Faraday Future Intelligent

Canoo Inc

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Canoo Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Canoo is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Faraday Future Intel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Faraday Future Intelligent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Canoo and Faraday Future

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

The idea behind Canoo Inc and Faraday Future Intelligent 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.