Correlation Between Nikola Corp and Ideanomics

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

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

Diversification Opportunities for Nikola Corp and Ideanomics

0.18

Correlation Coefficient

Nikola Corp  Ideanomics

Average diversification

The 3 months correlation between Nikola and Ideanomics is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Nikola Corp and Ideanomics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ideanomics 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 Ideanomics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ideanomics has no effect on the direction of Nikola Corp i.e., Nikola Corp and Ideanomics go up and down completely randomly.

Pair Corralation between Nikola Corp and Ideanomics

Given the investment horizon of 90 days Nikola Corp is expected to under-perform the Ideanomics. But the stock apears to be less risky and, when comparing its historical volatility, Nikola Corp is 8.33 times less risky than Ideanomics. The stock trades about -0.27 of its potential returns per unit of risk. The Ideanomics is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Ideanomics on September 20, 2024 and sell it today you would lose (11.67) from holding Ideanomics or give up 97.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Nikola Corp  vs.  Ideanomics

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.

Ideanomics

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ideanomics are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical and fundamental indicators, Ideanomics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nikola Corp and Ideanomics

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

The idea behind Nikola Corp and Ideanomics 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.