Correlation Between NikolaCorp and Ford
Can any of the company-specific risk be diversified away by investing in both NikolaCorp and Ford 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 NikolaCorp and Ford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NikolaCorp and Ford Motor, you can compare the effects of market volatilities on NikolaCorp and Ford 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 NikolaCorp with a short position of Ford. Check out your portfolio center. Please also check ongoing floating volatility patterns of NikolaCorp and Ford.
Diversification Opportunities for NikolaCorp and Ford
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between NikolaCorp and Ford is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding NikolaCorp and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor and NikolaCorp 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 NikolaCorp are associated (or correlated) with Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of NikolaCorp i.e., NikolaCorp and Ford go up and down completely randomly.
Pair Corralation between NikolaCorp and Ford
Given the investment horizon of 90 days NikolaCorp is expected to generate 2.55 times more return on investment than Ford. However, NikolaCorp is 2.55 times more volatile than Ford Motor. It trades about 0.18 of its potential returns per unit of risk. Ford Motor is currently generating about 0.2 per unit of risk. If you would invest 76.00 in NikolaCorp on December 29, 2023 and sell it today you would earn a total of 15.00 from holding NikolaCorp or generate 19.74% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
NikolaCorp vs. Ford Motor
Performance |
Timeline |
NikolaCorp |
Ford Motor |
NikolaCorp and Ford Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with NikolaCorp and Ford
The main advantage of trading using opposite NikolaCorp and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NikolaCorp position performs unexpectedly, Ford 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 Ford will offset losses from the drop in Ford's long position.NikolaCorp vs. Deere Company | NikolaCorp vs. Hyster Yale Materials Handling | NikolaCorp vs. Lion Electric Corp | NikolaCorp vs. Titan International |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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