Correlation Between Nikola Corp and North Peak

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

By analyzing existing cross correlation between Nikola Corp and North Peak Resources, you can compare the effects of market volatilities on Nikola Corp and North Peak 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 North Peak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nikola Corp and North Peak.

Diversification Opportunities for Nikola Corp and North Peak

0.85

Correlation Coefficient

Nikola Corp  North Peak

Very poor diversification

The 3 months correlation between Nikola and North is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Nikola Corp and North Peak Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Peak Resources 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 North Peak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Peak Resources has no effect on the direction of Nikola Corp i.e., Nikola Corp and North Peak go up and down completely randomly.

Pair Corralation between Nikola Corp and North Peak

Given the investment horizon of 90 days Nikola Corp is expected to under-perform the North Peak. In addition to that, Nikola Corp is 1.06 times more volatile than North Peak Resources. It trades about -0.14 of its total potential returns per unit of risk. North Peak Resources is currently generating about -0.03 per unit of volatility. If you would invest  122.00  in North Peak Resources on September 14, 2024 and sell it today you would lose (77.00) from holding North Peak Resources or give up 63.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.63%
Values	Daily Returns

Nikola Corp  vs.  North Peak Resources

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.

North Peak Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days North Peak Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Nikola Corp and North Peak

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

The idea behind Nikola Corp and North Peak Resources 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.