Correlation Between Komatsu and Nikola Corp

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

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

Diversification Opportunities for Komatsu and Nikola Corp

-0.8

Correlation Coefficient

Komatsu  Nikola Corp

Pay attention - limited upside

The 3 months correlation between Komatsu and Nikola is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Komatsu and Nikola Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nikola Corp and Komatsu 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 Komatsu are associated (or correlated) with Nikola Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nikola Corp has no effect on the direction of Komatsu i.e., Komatsu and Nikola Corp go up and down completely randomly.

Pair Corralation between Komatsu and Nikola Corp

Assuming the 90 days horizon Komatsu is expected to generate 0.16 times more return on investment than Nikola Corp. However, Komatsu is 6.36 times less risky than Nikola Corp. It trades about 0.08 of its potential returns per unit of risk. Nikola Corp is currently generating about -0.15 per unit of risk. If you would invest  2,750  in Komatsu on December 28, 2024 and sell it today you would earn a total of  311.00  from holding Komatsu or generate 11.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Komatsu  vs.  Nikola Corp

Komatsu

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Komatsu are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Komatsu reported solid returns over the last few months and may actually be approaching a breakup point.

Nikola Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nikola Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Komatsu and Nikola Corp

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

The idea behind Komatsu and Nikola Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.