Correlation Between Nikola Corp and Hitachi Construction

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

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

Diversification Opportunities for Nikola Corp and Hitachi Construction

-0.93

Correlation Coefficient

Nikola Corp  Hitachi Construction

Pay attention - limited upside

The 3 months correlation between Nikola and Hitachi is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Nikola Corp and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction 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 Hitachi Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitachi Construction has no effect on the direction of Nikola Corp i.e., Nikola Corp and Hitachi Construction go up and down completely randomly.

Pair Corralation between Nikola Corp and Hitachi Construction

Given the investment horizon of 90 days Nikola Corp is expected to under-perform the Hitachi Construction. In addition to that, Nikola Corp is 7.58 times more volatile than Hitachi Construction Machinery. It trades about -0.15 of its total potential returns per unit of risk. Hitachi Construction Machinery is currently generating about 0.22 per unit of volatility. If you would invest  4,389  in Hitachi Construction Machinery on December 28, 2024 and sell it today you would earn a total of  1,351  from holding Hitachi Construction Machinery or generate 30.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Nikola Corp  vs.  Hitachi Construction Machinery

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

Hitachi Construction

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hitachi Construction Machinery are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Hitachi Construction showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nikola Corp and Hitachi Construction

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

The idea behind Nikola Corp and Hitachi Construction Machinery 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.