Correlation Between NikolaCorp and Ford

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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 Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

NikolaCorp  vs.  Ford Motor

 Performance 
       Timeline  
NikolaCorp 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in NikolaCorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady essential indicators, NikolaCorp sustained solid returns over the last few months and may actually be approaching a breakup point.
Ford Motor 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in April 2024.

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.
The idea behind NikolaCorp and Ford Motor 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.

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