Correlation Between NikolaCorp and CNH Industrial

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

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

Diversification Opportunities for NikolaCorp and CNH Industrial

0.62

Correlation Coefficient

NikolaCorp  CNH Industrial

Poor diversification

The 3 months correlation between NikolaCorp and CNH is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding NikolaCorp and CNH Industrial NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNH Industrial NV and NikolaCorp 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 NikolaCorp are associated (or correlated) with CNH Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNH Industrial NV has no effect on the direction of NikolaCorp i.e., NikolaCorp and CNH Industrial go up and down completely randomly.

Pair Corralation between NikolaCorp and CNH Industrial

Given the investment horizon of 90 days NikolaCorp is expected to under-perform the CNH Industrial. In addition to that, NikolaCorp is 3.16 times more volatile than CNH Industrial NV. It trades about -0.26 of its total potential returns per unit of risk. CNH Industrial NV is currently generating about -0.23 per unit of volatility. If you would invest  1,282  in CNH Industrial NV on February 5, 2024 and sell it today you would lose (134.00) from holding CNH Industrial NV or give up 10.45% of portfolio value over 90 days.

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

NikolaCorp  vs.  CNH Industrial NV

NikolaCorp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NikolaCorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, NikolaCorp may actually be approaching a critical reversion point that can send shares even higher in June 2024.

CNH Industrial NV

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NikolaCorp and CNH Industrial

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

The idea behind NikolaCorp and CNH Industrial NV 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 Commodity Directory module to find actively traded commodities issued by global exchanges.