Correlation Between NikolaCorp and Xos

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

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

Diversification Opportunities for NikolaCorp and Xos

-0.05

Correlation Coefficient

NikolaCorp  Xos

Good diversification

The 3 months correlation between NikolaCorp and Xos is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding NikolaCorp and Xos Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xos Inc 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 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 NikolaCorp i.e., NikolaCorp and Xos go up and down completely randomly.

Pair Corralation between NikolaCorp and Xos

Given the investment horizon of 90 days NikolaCorp is expected to under-perform the Xos. In addition to that, NikolaCorp is 3.03 times more volatile than Xos Inc. It trades about -0.2 of its total potential returns per unit of risk. Xos Inc is currently generating about -0.36 per unit of volatility. If you would invest  900.00  in Xos Inc on February 4, 2024 and sell it today you would lose (155.00) from holding Xos Inc or give up 17.22% of portfolio value over 90 days.

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

NikolaCorp  vs.  Xos Inc

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 uncertain essential indicators, NikolaCorp may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Xos Inc

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with NikolaCorp and Xos

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

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.