Correlation Between Nikola Corp and Hino Motors

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

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

Diversification Opportunities for Nikola Corp and Hino Motors

0.74

Correlation Coefficient

Nikola Corp  Hino Motors

Poor diversification

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

Pair Corralation between Nikola Corp and Hino Motors

Given the investment horizon of 90 days Nikola Corp is expected to under-perform the Hino Motors. In addition to that, Nikola Corp is 2.4 times more volatile than Hino Motors Ltd. It trades about -0.27 of its total potential returns per unit of risk. Hino Motors Ltd is currently generating about -0.06 per unit of volatility. If you would invest  3,016  in Hino Motors Ltd on September 16, 2024 and sell it today you would lose (389.00) from holding Hino Motors Ltd or give up 12.9% of portfolio value over 90 days.

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

Nikola Corp  vs.  Hino Motors Ltd

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 inconsistent 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.

Hino Motors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hino Motors Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Nikola Corp and Hino Motors

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

The idea behind Nikola Corp and Hino Motors Ltd 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.