Correlation Between Nikola Corp and Track

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

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

Diversification Opportunities for Nikola Corp and Track

0.41

Correlation Coefficient

Nikola Corp  Track

Very weak diversification

The 3 months correlation between Nikola and Track is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Nikola Corp and Track Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Track Group 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 Track. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Track Group has no effect on the direction of Nikola Corp i.e., Nikola Corp and Track go up and down completely randomly.

Pair Corralation between Nikola Corp and Track

Given the investment horizon of 90 days Nikola Corp is expected to under-perform the Track. But the stock apears to be less risky and, when comparing its historical volatility, Nikola Corp is 1.4 times less risky than Track. The stock trades about -0.14 of its potential returns per unit of risk. The Track Group is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  33.00  in Track Group on September 13, 2024 and sell it today you would lose (22.00) from holding Track Group or give up 66.67% of portfolio value over 90 days.

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

Nikola Corp  vs.  Track Group

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.

Track Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Track Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Track is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Nikola Corp and Track

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

The idea behind Nikola Corp and Track Group 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.