Correlation Between Workhorse and Ferrari NV

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

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

Diversification Opportunities for Workhorse and Ferrari NV

-0.62

Correlation Coefficient

Workhorse  Ferrari NV

Excellent diversification

The 3 months correlation between Workhorse and Ferrari is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Workhorse Group and Ferrari NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrari NV 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 Ferrari NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrari NV has no effect on the direction of Workhorse i.e., Workhorse and Ferrari NV go up and down completely randomly.

Pair Corralation between Workhorse and Ferrari NV

Given the investment horizon of 90 days Workhorse Group is expected to generate 5.61 times more return on investment than Ferrari NV. However, Workhorse is 5.61 times more volatile than Ferrari NV. It trades about 0.06 of its potential returns per unit of risk. Ferrari NV is currently generating about -0.08 per unit of risk. If you would invest  78.00  in Workhorse Group on September 19, 2024 and sell it today you would earn a total of  8.00  from holding Workhorse Group or generate 10.26% return on investment over 90 days.

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

Workhorse Group  vs.  Ferrari NV

Workhorse Group

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Workhorse Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, Workhorse unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ferrari NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ferrari NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Workhorse and Ferrari NV

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

The idea behind Workhorse Group and Ferrari NV 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.