Correlation Between Nikola Corp and China Health

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

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

Diversification Opportunities for Nikola Corp and China Health

0.36

Correlation Coefficient

Nikola Corp  China Health

Weak diversification

The 3 months correlation between Nikola and China is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Nikola Corp and China Health Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Health Management 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 China Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Health Management has no effect on the direction of Nikola Corp i.e., Nikola Corp and China Health go up and down completely randomly.

Pair Corralation between Nikola Corp and China Health

Given the investment horizon of 90 days Nikola Corp is expected to under-perform the China Health. But the stock apears to be less risky and, when comparing its historical volatility, Nikola Corp is 1.48 times less risky than China Health. The stock trades about -0.4 of its potential returns per unit of risk. The China Health Management is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  0.55  in China Health Management on September 16, 2024 and sell it today you would lose (0.15) from holding China Health Management or give up 27.27% of portfolio value over 90 days.

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

Nikola Corp  vs.  China Health Management

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 inconsistent 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.

China Health Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Health Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Nikola Corp and China Health

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

The idea behind Nikola Corp and China Health Management 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.