Correlation Between Lordstown Motors and Canoo
Can any of the company-specific risk be diversified away by investing in both Lordstown Motors and Canoo 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 Lordstown Motors and Canoo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lordstown Motors Corp and Canoo Inc, you can compare the effects of market volatilities on Lordstown Motors and Canoo 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 Lordstown Motors with a short position of Canoo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lordstown Motors and Canoo.
Diversification Opportunities for Lordstown Motors and Canoo
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lordstown and Canoo is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Lordstown Motors Corp and Canoo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canoo Inc and Lordstown Motors 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 Lordstown Motors Corp are associated (or correlated) with Canoo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canoo Inc has no effect on the direction of Lordstown Motors i.e., Lordstown Motors and Canoo go up and down completely randomly.
Pair Corralation between Lordstown Motors and Canoo
Given the investment horizon of 90 days Lordstown Motors Corp is expected to under-perform the Canoo. But the stock apears to be less risky and, when comparing its historical volatility, Lordstown Motors Corp is 1.01 times less risky than Canoo. The stock trades about -0.13 of its potential returns per unit of risk. The Canoo Inc is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 3,220 in Canoo Inc on August 24, 2024 and sell it today you would lose (3,175) from holding Canoo Inc or give up 98.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 31.92% |
| Values | Daily Returns |
Lordstown Motors Corp vs. Canoo Inc
Performance |
| Timeline |
| Lordstown Motors Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Canoo Inc |
Lordstown Motors and Canoo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lordstown Motors and Canoo
The main advantage of trading using opposite Lordstown Motors and Canoo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lordstown Motors position performs unexpectedly, Canoo 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 Canoo will offset losses from the drop in Canoo's long position.| Lordstown Motors vs. Workhorse Group | Lordstown Motors vs. Canoo Inc | Lordstown Motors vs. Hyliion Holdings Corp | Lordstown Motors vs. Blink Charging Co |
| Canoo vs. Lucid Group | Canoo vs. Rivian Automotive | Canoo vs. Polestar Automotive Holding | Canoo vs. Mullen Automotive |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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