Correlation Between Nikola Corp and GreenPower

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

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

Diversification Opportunities for Nikola Corp and GreenPower

0.85

Correlation Coefficient

Nikola Corp  GreenPower

Very poor diversification

The 3 months correlation between Nikola and GreenPower is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Nikola Corp and GreenPower Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenPower Motor 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 GreenPower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenPower Motor has no effect on the direction of Nikola Corp i.e., Nikola Corp and GreenPower go up and down completely randomly.

Pair Corralation between Nikola Corp and GreenPower

Given the investment horizon of 90 days Nikola Corp is expected to under-perform the GreenPower. In addition to that, Nikola Corp is 1.5 times more volatile than GreenPower Motor. It trades about -0.47 of its total potential returns per unit of risk. GreenPower Motor is currently generating about -0.23 per unit of volatility. If you would invest  90.00  in GreenPower Motor on September 26, 2024 and sell it today you would lose (16.00) from holding GreenPower Motor or give up 17.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Nikola Corp  vs.  GreenPower Motor

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.

GreenPower Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GreenPower Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Nikola Corp and GreenPower

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

The idea behind Nikola Corp and GreenPower Motor 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.