Correlation Between Lightning EMotors and Nikola Corp

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

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

Diversification Opportunities for Lightning EMotors and Nikola Corp

0.51

Correlation Coefficient

Lightning EMotors  Nikola Corp

Very weak diversification

The 3 months correlation between Lightning and Nikola is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Lightning EMotors and Nikola Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nikola Corp and Lightning EMotors 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 Lightning EMotors 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 Lightning EMotors i.e., Lightning EMotors and Nikola Corp go up and down completely randomly.

Pair Corralation between Lightning EMotors and Nikola Corp

If you would invest  386.00  in Lightning EMotors on September 19, 2024 and sell it today you would earn a total of  0.00  from holding Lightning EMotors or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	4.55%
Values	Daily Returns

Lightning EMotors  vs.  Nikola Corp

Lightning EMotors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lightning EMotors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Lightning EMotors is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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.

Pair Trading with Lightning EMotors and Nikola Corp

The main advantage of trading using opposite Lightning EMotors and Nikola Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lightning EMotors 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.

The idea behind Lightning EMotors and Nikola Corp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.