Correlation Between Nikola Corp and American Premium

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

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

Diversification Opportunities for Nikola Corp and American Premium

0.61

Correlation Coefficient

Nikola Corp  American Premium

Poor diversification

The 3 months correlation between Nikola and American is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Nikola Corp and American Premium Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Premium Water 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 American Premium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Premium Water has no effect on the direction of Nikola Corp i.e., Nikola Corp and American Premium go up and down completely randomly.

Pair Corralation between Nikola Corp and American Premium

Given the investment horizon of 90 days Nikola Corp is expected to under-perform the American Premium. But the stock apears to be less risky and, when comparing its historical volatility, Nikola Corp is 10.17 times less risky than American Premium. The stock trades about -0.21 of its potential returns per unit of risk. The American Premium Water is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.01  in American Premium Water on November 28, 2024 and sell it today you would lose (0.01) from holding American Premium Water or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	84.48%
Values	Daily Returns

Nikola Corp  vs.  American Premium Water

Nikola Corp

Risk-Adjusted Performance

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

American Premium Water

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Premium Water are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, American Premium demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nikola Corp and American Premium

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

The idea behind Nikola Corp and American Premium Water 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.