Is it a good practice to pass state/custom hook into another custom React hook?

So what I'm asking is...

const useCustomHook = color => {
  const rainbowColors = ["red", "yellow", "blue", "purple"];
  const makeARainbow = rainbowColors.indexOf(color) != -1;
  return { makeARainbow };
}

const Component = () => {
  const [color, setColor] = useState("green");
  const magicobject = useCustomHook(color);
  return <div>{magicobject.makeARainbow ? "Hurray!" : "Nah"}</div>
}

As far as I understand this should be alright so far. See also: https://reactjs.org/docs/hooks-custom.html#tip-pass-information-between-hooks . But what if things get a little more complex and I start to pass a whole hook into another hook?

const useFactory = car => {
  const [availableFrames, setAvailableFrames] = useState([]);
  const [engines, setEngines] = useState([]);
  ...
  const readyForProduction =  availableFrames.indexOf(car.frame) != -1 && engines.map(e => e.type).indexOf(car.engineType) != -1 ...;
  return { readyForProduction, ... }
}

const Component = () => {
  const car = useCarModel();
  const factory = useFactory(car);
  return factory.readyForProduction ? "Hurray!" : "Nah";
}

Both car and factory have their own state(s), handlers, methods, maybe even useEffects and they can be passed into a presentational component. I haven't found any critique of this so far, so I assume it should be alright, but my intuition tells me that it can lead to some unexpected behaviour (For example, if factory starts to change the state of the car).