Correlation Between Volcon and Harley Davidson

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

By analyzing existing cross correlation between Volcon Inc and Harley Davidson, you can compare the effects of market volatilities on Volcon and Harley Davidson 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 Volcon with a short position of Harley Davidson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volcon and Harley Davidson.

Diversification Opportunities for Volcon and Harley Davidson

-0.7

Correlation Coefficient

Volcon  Harley Davidson

Excellent diversification

The 3 months correlation between Volcon and Harley is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Volcon Inc and Harley Davidson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harley Davidson and Volcon 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 Volcon Inc are associated (or correlated) with Harley Davidson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harley Davidson has no effect on the direction of Volcon i.e., Volcon and Harley Davidson go up and down completely randomly.

Pair Corralation between Volcon and Harley Davidson

Given the investment horizon of 90 days Volcon Inc is expected to under-perform the Harley Davidson. In addition to that, Volcon is 2.94 times more volatile than Harley Davidson. It trades about -0.28 of its total potential returns per unit of risk. Harley Davidson is currently generating about -0.01 per unit of volatility. If you would invest  3,634  in Harley Davidson on January 31, 2024 and sell it today you would lose (110.00) from holding Harley Davidson or give up 3.03% of portfolio value over 90 days.

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

Volcon Inc  vs.  Harley Davidson

Volcon Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volcon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Harley Davidson

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Harley Davidson are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Harley Davidson may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Volcon and Harley Davidson

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

The idea behind Volcon Inc and Harley Davidson 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.