Correlation Between Life Electric and Curtiss Motorcycles

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

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

Diversification Opportunities for Life Electric and Curtiss Motorcycles

0.0

Correlation Coefficient

Life Electric  Curtiss Motorcycles

Pay attention - limited upside

The 3 months correlation between Life and Curtiss is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Life Electric Vehicles and Curtiss Motorcycles in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Curtiss Motorcycles and Life Electric 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 Life Electric Vehicles are associated (or correlated) with Curtiss Motorcycles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Curtiss Motorcycles has no effect on the direction of Life Electric i.e., Life Electric and Curtiss Motorcycles go up and down completely randomly.

Pair Corralation between Life Electric and Curtiss Motorcycles

Given the investment horizon of 90 days Life Electric is expected to generate 3.94 times less return on investment than Curtiss Motorcycles. But when comparing it to its historical volatility, Life Electric Vehicles is 1.73 times less risky than Curtiss Motorcycles. It trades about 0.08 of its potential returns per unit of risk. Curtiss Motorcycles is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2.30  in Curtiss Motorcycles on December 5, 2024 and sell it today you would earn a total of  2.10  from holding Curtiss Motorcycles or generate 91.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Life Electric Vehicles  vs.  Curtiss Motorcycles

Life Electric Vehicles

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Life Electric Vehicles are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Life Electric showed solid returns over the last few months and may actually be approaching a breakup point.

Curtiss Motorcycles

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Curtiss Motorcycles are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Curtiss Motorcycles unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Life Electric and Curtiss Motorcycles

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

The idea behind Life Electric Vehicles and Curtiss Motorcycles 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.