Correlation Between Nikola Corp and Solitron Devices

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

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

Diversification Opportunities for Nikola Corp and Solitron Devices

0.4

Correlation Coefficient

Nikola Corp  Solitron Devices

Very weak diversification

The 3 months correlation between Nikola and Solitron is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Nikola Corp and Solitron Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solitron Devices 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 Solitron Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solitron Devices has no effect on the direction of Nikola Corp i.e., Nikola Corp and Solitron Devices go up and down completely randomly.

Pair Corralation between Nikola Corp and Solitron Devices

Given the investment horizon of 90 days Nikola Corp is expected to under-perform the Solitron Devices. In addition to that, Nikola Corp is 3.97 times more volatile than Solitron Devices. It trades about -0.14 of its total potential returns per unit of risk. Solitron Devices is currently generating about 0.0 per unit of volatility. If you would invest  1,812  in Solitron Devices on December 4, 2024 and sell it today you would lose (143.00) from holding Solitron Devices or give up 7.89% of portfolio value over 90 days.

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

Nikola Corp  vs.  Solitron Devices

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.

Solitron Devices

Risk-Adjusted Performance

Very Weak

Over the last 90 days Solitron Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Solitron Devices is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Nikola Corp and Solitron Devices

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

The idea behind Nikola Corp and Solitron Devices 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.