Correlation Between Nikola Corp and CubicFarm Systems

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

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

Diversification Opportunities for Nikola Corp and CubicFarm Systems

-0.15

Correlation Coefficient

Nikola Corp  CubicFarm Systems

Good diversification

The 3 months correlation between Nikola and CubicFarm is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Nikola Corp and CubicFarm Systems Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CubicFarm Systems Corp 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 CubicFarm Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CubicFarm Systems Corp has no effect on the direction of Nikola Corp i.e., Nikola Corp and CubicFarm Systems go up and down completely randomly.

Pair Corralation between Nikola Corp and CubicFarm Systems

Given the investment horizon of 90 days Nikola Corp is expected to under-perform the CubicFarm Systems. But the stock apears to be less risky and, when comparing its historical volatility, Nikola Corp is 28.5 times less risky than CubicFarm Systems. The stock trades about -0.26 of its potential returns per unit of risk. The CubicFarm Systems Corp is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  6.00  in CubicFarm Systems Corp on September 17, 2024 and sell it today you would earn a total of  1.00  from holding CubicFarm Systems Corp or generate 16.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Nikola Corp  vs.  CubicFarm Systems Corp

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

CubicFarm Systems Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CubicFarm Systems Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, CubicFarm Systems reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nikola Corp and CubicFarm Systems

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

The idea behind Nikola Corp and CubicFarm Systems 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.