Correlation Between Urban Gro and Nikola Corp
Can any of the company-specific risk be diversified away by investing in both Urban Gro and Nikola Corp 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 Urban Gro and Nikola Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Urban Gro and Nikola Corp, you can compare the effects of market volatilities on Urban Gro and Nikola Corp 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 Urban Gro with a short position of Nikola Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Urban Gro and Nikola Corp.
Diversification Opportunities for Urban Gro and Nikola Corp
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Urban and Nikola is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Urban Gro and Nikola Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nikola Corp and Urban Gro 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 Urban Gro are associated (or correlated) with Nikola Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nikola Corp has no effect on the direction of Urban Gro i.e., Urban Gro and Nikola Corp go up and down completely randomly.
Pair Corralation between Urban Gro and Nikola Corp
Given the investment horizon of 90 days Urban Gro is expected to under-perform the Nikola Corp. But the stock apears to be less risky and, when comparing its historical volatility, Urban Gro is 4.31 times less risky than Nikola Corp. The stock trades about -0.18 of its potential returns per unit of risk. The Nikola Corp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 111.00 in Nikola Corp on December 28, 2024 and sell it today you would lose (87.00) from holding Nikola Corp or give up 78.38% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Urban Gro vs. Nikola Corp
Performance |
Timeline |
Urban Gro |
Nikola Corp |
Urban Gro and Nikola Corp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Urban Gro and Nikola Corp
The main advantage of trading using opposite Urban Gro and Nikola Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Urban Gro position performs unexpectedly, Nikola Corp 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 Nikola Corp will offset losses from the drop in Nikola Corp's long position.Urban Gro vs. CEA Industries | Urban Gro vs. Titan International | Urban Gro vs. Gencor Industries | Urban Gro vs. Astec Industries |
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Check out your portfolio center.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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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