Correlation Between Faraday Future and Workhorse

Can any of the company-specific risk be diversified away by investing in both Faraday Future and Workhorse 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 Workhorse 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 Workhorse Group, you can compare the effects of market volatilities on Faraday Future and Workhorse 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 Workhorse. Check out your portfolio center. Please also check ongoing floating volatility patterns of Faraday Future and Workhorse.

Diversification Opportunities for Faraday Future and Workhorse

-0.73

Correlation Coefficient

Faraday Future  Workhorse

Pay attention - limited upside

The 3 months correlation between Faraday and Workhorse is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Faraday Future Intelligent and Workhorse Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Workhorse Group 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 Workhorse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Workhorse Group has no effect on the direction of Faraday Future i.e., Faraday Future and Workhorse go up and down completely randomly.

Pair Corralation between Faraday Future and Workhorse

Given the investment horizon of 90 days Faraday Future Intelligent is expected to under-perform the Workhorse. But the stock apears to be less risky and, when comparing its historical volatility, Faraday Future Intelligent is 1.14 times less risky than Workhorse. The stock trades about -0.13 of its potential returns per unit of risk. The Workhorse Group is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  119.00  in Workhorse Group on September 12, 2024 and sell it today you would lose (13.00) from holding Workhorse Group or give up 10.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Faraday Future Intelligent  vs.  Workhorse Group

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.

Workhorse Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Workhorse Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical indicators, Workhorse unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Faraday Future and Workhorse

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

The idea behind Faraday Future Intelligent and Workhorse Group 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.