Correlation Between Canoo and Ferrari NV

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

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

Diversification Opportunities for Canoo and Ferrari NV

0.67

Correlation Coefficient

Canoo  Ferrari NV

Poor diversification

The 3 months correlation between Canoo and Ferrari is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Canoo Inc and Ferrari NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrari NV and Canoo 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 Canoo Inc are associated (or correlated) with Ferrari NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrari NV has no effect on the direction of Canoo i.e., Canoo and Ferrari NV go up and down completely randomly.

Pair Corralation between Canoo and Ferrari NV

Given the investment horizon of 90 days Canoo Inc is expected to under-perform the Ferrari NV. In addition to that, Canoo is 7.2 times more volatile than Ferrari NV. It trades about -0.22 of its total potential returns per unit of risk. Ferrari NV is currently generating about -0.08 per unit of volatility. If you would invest  47,406  in Ferrari NV on September 19, 2024 and sell it today you would lose (4,170) from holding Ferrari NV or give up 8.8% of portfolio value over 90 days.

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

Canoo Inc  vs.  Ferrari NV

Canoo Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canoo 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 technical and fundamental indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Ferrari NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ferrari NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Canoo and Ferrari NV

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

The idea behind Canoo Inc and Ferrari 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.

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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.