Correlation Between Nikola Corp and Xos

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Can any of the company-specific risk be diversified away by investing in both Nikola Corp and Xos 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 Xos into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nikola Corp and Xos Inc, you can compare the effects of market volatilities on Nikola Corp and Xos 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 Xos. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nikola Corp and Xos.

Diversification Opportunities for Nikola Corp and Xos

0.44
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Nikola and Xos is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Nikola Corp and Xos Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xos Inc 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 Xos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xos Inc has no effect on the direction of Nikola Corp i.e., Nikola Corp and Xos go up and down completely randomly.

Pair Corralation between Nikola Corp and Xos

Given the investment horizon of 90 days Nikola Corp is expected to under-perform the Xos. In addition to that, Nikola Corp is 1.13 times more volatile than Xos Inc. It trades about -0.04 of its total potential returns per unit of risk. Xos Inc is currently generating about -0.04 per unit of volatility. If you would invest  6,000  in Xos Inc on March 24, 2024 and sell it today you would lose (5,318) from holding Xos Inc or give up 88.63% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Nikola Corp  vs.  Xos Inc

 Performance 
       Timeline  
Nikola Corp 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Nikola Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.
Xos Inc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Xos Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Nikola Corp and Xos Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nikola Corp and Xos

The main advantage of trading using opposite Nikola Corp and Xos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nikola Corp position performs unexpectedly, Xos 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 Xos will offset losses from the drop in Xos' long position.
The idea behind Nikola Corp and Xos Inc 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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