Correlation Between Workhorse and Carbon Revolution

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

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

Diversification Opportunities for Workhorse and Carbon Revolution

-0.39

Correlation Coefficient

Workhorse  Carbon Revolution

Very good diversification

The 3 months correlation between Workhorse and Carbon is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Workhorse Group and Carbon Revolution Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carbon Revolution Public and Workhorse 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 Workhorse Group are associated (or correlated) with Carbon Revolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carbon Revolution Public has no effect on the direction of Workhorse i.e., Workhorse and Carbon Revolution go up and down completely randomly.

Pair Corralation between Workhorse and Carbon Revolution

Given the investment horizon of 90 days Workhorse Group is expected to under-perform the Carbon Revolution. But the stock apears to be less risky and, when comparing its historical volatility, Workhorse Group is 7.08 times less risky than Carbon Revolution. The stock trades about -0.26 of its potential returns per unit of risk. The Carbon Revolution Public is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  247.00  in Carbon Revolution Public on October 1, 2024 and sell it today you would earn a total of  577.00  from holding Carbon Revolution Public or generate 233.6% return on investment over 90 days.

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

Workhorse Group  vs.  Carbon Revolution Public

Workhorse Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Workhorse Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical indicators, Workhorse unveiled solid returns over the last few months and may actually be approaching a breakup point.

Carbon Revolution Public

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carbon Revolution Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Carbon Revolution showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Workhorse and Carbon Revolution

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

The idea behind Workhorse Group and Carbon Revolution Public 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.