Correlation Between Dow Jones and Nikola Corp
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Nikola Corp 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 Dow Jones and Nikola Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Nikola Corp, you can compare the effects of market volatilities on Dow Jones and Nikola Corp 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 Dow Jones with a short position of Nikola Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Nikola Corp.
Diversification Opportunities for Dow Jones and Nikola Corp
-0.82 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Dow and Nikola is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Nikola Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nikola Corp and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Nikola Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nikola Corp has no effect on the direction of Dow Jones i.e., Dow Jones and Nikola Corp go up and down completely randomly.
Pair Corralation between Dow Jones and Nikola Corp
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.12 times more return on investment than Nikola Corp. However, Dow Jones Industrial is 8.66 times less risky than Nikola Corp. It trades about 0.18 of its potential returns per unit of risk. Nikola Corp is currently generating about -0.23 per unit of risk. If you would invest 4,109,142 in Dow Jones Industrial on August 28, 2024 and sell it today you would earn a total of 364,515 from holding Dow Jones Industrial or generate 8.87% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Dow Jones Industrial vs. Nikola Corp
Performance |
Timeline |
Dow Jones and Nikola Corp Volatility Contrast
Predicted Return Density |
Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Nikola Corp
Pair trading matchups for Nikola Corp
Pair Trading with Dow Jones and Nikola Corp
The main advantage of trading using opposite Dow Jones and Nikola Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Nikola Corp 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 Nikola Corp will offset losses from the drop in Nikola Corp's long position.Dow Jones vs. Meiwu Technology Co | Dow Jones vs. 17 Education Technology | Dow Jones vs. 51Talk Online Education | Dow Jones vs. Afya |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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