Correlation Between Nikola Corp and CEA Industries
Can any of the company-specific risk be diversified away by investing in both Nikola Corp and CEA Industries 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 CEA Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nikola Corp and CEA Industries Warrant, you can compare the effects of market volatilities on Nikola Corp and CEA Industries 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 CEA Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nikola Corp and CEA Industries.
Diversification Opportunities for Nikola Corp and CEA Industries
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nikola and CEA is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Nikola Corp and CEA Industries Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEA Industries Warrant 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 CEA Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEA Industries Warrant has no effect on the direction of Nikola Corp i.e., Nikola Corp and CEA Industries go up and down completely randomly.
Pair Corralation between Nikola Corp and CEA Industries
Given the investment horizon of 90 days Nikola Corp is expected to under-perform the CEA Industries. But the stock apears to be less risky and, when comparing its historical volatility, Nikola Corp is 6.24 times less risky than CEA Industries. The stock trades about -0.27 of its potential returns per unit of risk. The CEA Industries Warrant is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2.50 in CEA Industries Warrant on November 1, 2024 and sell it today you would lose (1.01) from holding CEA Industries Warrant or give up 40.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 59.26% |
| Values | Daily Returns |
Nikola Corp vs. CEA Industries Warrant
Performance |
| Timeline |
| Nikola Corp |
| CEA Industries Warrant |
Nikola Corp and CEA Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nikola Corp and CEA Industries
The main advantage of trading using opposite Nikola Corp and CEA Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nikola Corp position performs unexpectedly, CEA Industries 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 CEA Industries will offset losses from the drop in CEA Industries' long position.| Nikola Corp vs. Xos Inc | Nikola Corp vs. Hydrofarm Holdings Group | Nikola Corp vs. Caterpillar | Nikola Corp vs. AGCO Corporation |
| CEA Industries vs. CEA Industries | CEA Industries vs. Thayer Ventures Acquisition | CEA Industries vs. Iveda Solutions Warrant | CEA Industries vs. Aquagold International |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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