Correlation Between Canoo and Hyzon Motors

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

By analyzing existing cross correlation between Canoo Inc and Hyzon Motors, you can compare the effects of market volatilities on Canoo and Hyzon Motors 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 Hyzon Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canoo and Hyzon Motors.

Diversification Opportunities for Canoo and Hyzon Motors

0.3

Correlation Coefficient

Canoo  Hyzon Motors

Weak diversification

The 3 months correlation between Canoo and Hyzon is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Canoo Inc and Hyzon Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyzon Motors 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 Hyzon Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyzon Motors has no effect on the direction of Canoo i.e., Canoo and Hyzon Motors go up and down completely randomly.

Pair Corralation between Canoo and Hyzon Motors

Given the investment horizon of 90 days Canoo Inc is expected to generate 3.55 times more return on investment than Hyzon Motors. However, Canoo is 3.55 times more volatile than Hyzon Motors. It trades about -0.09 of its potential returns per unit of risk. Hyzon Motors is currently generating about -0.73 per unit of risk. If you would invest  387.00  in Canoo Inc on January 31, 2024 and sell it today you would lose (105.00) from holding Canoo Inc or give up 27.13% of portfolio value over 90 days.

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

Canoo Inc  vs.  Hyzon Motors

Canoo Inc

Risk-Adjusted Performance

0 of 100

Very 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.

Hyzon Motors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyzon Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic 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.

Pair Trading with Canoo and Hyzon Motors

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

The idea behind Canoo Inc and Hyzon Motors 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.