Correlation Between Canoo and Motorcar Parts

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

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

Diversification Opportunities for Canoo and Motorcar Parts

-0.76

Correlation Coefficient

Canoo  Motorcar Parts

Pay attention - limited upside

The 3 months correlation between Canoo and Motorcar is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Canoo Inc and Motorcar Parts of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motorcar Parts 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 Motorcar Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Motorcar Parts has no effect on the direction of Canoo i.e., Canoo and Motorcar Parts go up and down completely randomly.

Pair Corralation between Canoo and Motorcar Parts

Given the investment horizon of 90 days Canoo Inc is expected to under-perform the Motorcar Parts. In addition to that, Canoo is 3.85 times more volatile than Motorcar Parts of. It trades about -0.15 of its total potential returns per unit of risk. Motorcar Parts of is currently generating about 0.06 per unit of volatility. If you would invest  599.00  in Motorcar Parts of on October 26, 2024 and sell it today you would earn a total of  124.00  from holding Motorcar Parts of or generate 20.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.19%
Values	Daily Returns

Canoo Inc  vs.  Motorcar Parts of

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 February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Motorcar Parts

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Motorcar Parts of are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Motorcar Parts sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canoo and Motorcar Parts

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

The idea behind Canoo Inc and Motorcar Parts of 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.