Correlation Between Faraday Future and Canoo

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

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

Diversification Opportunities for Faraday Future and Canoo

0.89

Correlation Coefficient

Faraday Future  Canoo

Very poor diversification

The 3 months correlation between Faraday and Canoo is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Faraday Future Intelligent and Canoo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canoo Inc and Faraday Future 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 Faraday Future Intelligent are associated (or correlated) with Canoo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canoo Inc has no effect on the direction of Faraday Future i.e., Faraday Future and Canoo go up and down completely randomly.

Pair Corralation between Faraday Future and Canoo

Given the investment horizon of 90 days Faraday Future Intelligent is expected to under-perform the Canoo. But the stock apears to be less risky and, when comparing its historical volatility, Faraday Future Intelligent is 1.62 times less risky than Canoo. The stock trades about -0.4 of its potential returns per unit of risk. The Canoo Inc is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest  155.00  in Canoo Inc on September 4, 2024 and sell it today you would lose (118.00) from holding Canoo Inc or give up 76.13% of portfolio value over 90 days.

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

Faraday Future Intelligent  vs.  Canoo Inc

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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Faraday Future and Canoo

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

The idea behind Faraday Future Intelligent and Canoo Inc 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.