Correlation Between NWTN and Workhorse

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

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

Diversification Opportunities for NWTN and Workhorse

0.75

Correlation Coefficient

NWTN  Workhorse

Poor diversification

The 3 months correlation between NWTN and Workhorse is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding NWTN Class B and Workhorse Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Workhorse Group and NWTN 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 NWTN Class B are associated (or correlated) with Workhorse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Workhorse Group has no effect on the direction of NWTN i.e., NWTN and Workhorse go up and down completely randomly.

Pair Corralation between NWTN and Workhorse

Given the investment horizon of 90 days NWTN Class B is expected to generate 1.38 times more return on investment than Workhorse. However, NWTN is 1.38 times more volatile than Workhorse Group. It trades about 0.02 of its potential returns per unit of risk. Workhorse Group is currently generating about -0.03 per unit of risk. If you would invest  118.00  in NWTN Class B on September 12, 2024 and sell it today you would lose (7.00) from holding NWTN Class B or give up 5.93% of portfolio value over 90 days.

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

NWTN Class B  vs.  Workhorse Group

NWTN Class B

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NWTN Class B are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, NWTN displayed solid returns over the last few months and may actually be approaching a breakup point.

Workhorse Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Workhorse Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical indicators, Workhorse unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NWTN and Workhorse

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

The idea behind NWTN Class B and Workhorse 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.