Correlation Between Volcon and Worksport

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

By analyzing existing cross correlation between Volcon Inc and Worksport, you can compare the effects of market volatilities on Volcon and Worksport 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 Volcon with a short position of Worksport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volcon and Worksport.

Diversification Opportunities for Volcon and Worksport

-0.58

Correlation Coefficient

Volcon  Worksport

Excellent diversification

The 3 months correlation between Volcon and Worksport is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Volcon Inc and Worksport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Worksport and Volcon 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 Volcon Inc are associated (or correlated) with Worksport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Worksport has no effect on the direction of Volcon i.e., Volcon and Worksport go up and down completely randomly.

Pair Corralation between Volcon and Worksport

Given the investment horizon of 90 days Volcon Inc is expected to under-perform the Worksport. But the stock apears to be less risky and, when comparing its historical volatility, Volcon Inc is 1.43 times less risky than Worksport. The stock trades about -0.19 of its potential returns per unit of risk. The Worksport is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  64.00  in Worksport on September 23, 2024 and sell it today you would earn a total of  20.00  from holding Worksport or generate 31.25% return on investment over 90 days.

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

Volcon Inc  vs.  Worksport

Volcon Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volcon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Worksport

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Worksport are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Worksport reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Volcon and Worksport

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

The idea behind Volcon Inc and Worksport 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.