Correlation Between WM Technology and Canoo Holdings

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

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

Diversification Opportunities for WM Technology and Canoo Holdings

0.25

Correlation Coefficient

WM Technology  Canoo Holdings

Modest diversification

The 3 months correlation between MAPSW and Canoo is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding WM Technology and Canoo Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canoo Holdings and WM Technology 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 WM Technology are associated (or correlated) with Canoo Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canoo Holdings has no effect on the direction of WM Technology i.e., WM Technology and Canoo Holdings go up and down completely randomly.

Pair Corralation between WM Technology and Canoo Holdings

Assuming the 90 days horizon WM Technology is expected to generate 1.78 times more return on investment than Canoo Holdings. However, WM Technology is 1.78 times more volatile than Canoo Holdings. It trades about 0.06 of its potential returns per unit of risk. Canoo Holdings is currently generating about -0.01 per unit of risk. If you would invest  15.00  in WM Technology on September 3, 2024 and sell it today you would lose (10.99) from holding WM Technology or give up 73.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.75%
Values	Daily Returns

WM Technology  vs.  Canoo Holdings

WM Technology

Risk-Adjusted Performance

6 of 100

Modest

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

Canoo Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canoo Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic 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 WM Technology and Canoo Holdings

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

The idea behind WM Technology and Canoo Holdings 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.

Check out your portfolio center.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.