Correlation Between Nikola Corp and Aurora Solar

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

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

Diversification Opportunities for Nikola Corp and Aurora Solar

0.74

Correlation Coefficient

Nikola Corp  Aurora Solar

Poor diversification

The 3 months correlation between Nikola and Aurora is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Nikola Corp and Aurora Solar Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Solar Technologies and Nikola Corp 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 Nikola Corp are associated (or correlated) with Aurora Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Solar Technologies has no effect on the direction of Nikola Corp i.e., Nikola Corp and Aurora Solar go up and down completely randomly.

Pair Corralation between Nikola Corp and Aurora Solar

Given the investment horizon of 90 days Nikola Corp is expected to under-perform the Aurora Solar. But the stock apears to be less risky and, when comparing its historical volatility, Nikola Corp is 1.61 times less risky than Aurora Solar. The stock trades about -0.18 of its potential returns per unit of risk. The Aurora Solar Technologies is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1.95  in Aurora Solar Technologies on October 20, 2024 and sell it today you would lose (0.40) from holding Aurora Solar Technologies or give up 20.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Nikola Corp  vs.  Aurora Solar Technologies

Nikola Corp

Risk-Adjusted Performance

0 of 100

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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Aurora Solar Technologies

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Solar Technologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Aurora Solar reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nikola Corp and Aurora Solar

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

The idea behind Nikola Corp and Aurora Solar Technologies 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 Stocks Directory module to find actively traded stocks across global markets.