Correlation Between Eos Energy and Microvast Holdings

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

By analyzing existing cross correlation between Eos Energy Enterprises and Microvast Holdings, you can compare the effects of market volatilities on Eos Energy and Microvast Holdings 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 Eos Energy with a short position of Microvast Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eos Energy and Microvast Holdings.

Diversification Opportunities for Eos Energy and Microvast Holdings

-0.43

Correlation Coefficient

Eos Energy  Microvast Holdings

Very good diversification

The 3 months correlation between Eos and Microvast is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Eos Energy Enterprises and Microvast Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microvast Holdings and Eos Energy 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 Eos Energy Enterprises are associated (or correlated) with Microvast Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microvast Holdings has no effect on the direction of Eos Energy i.e., Eos Energy and Microvast Holdings go up and down completely randomly.

Pair Corralation between Eos Energy and Microvast Holdings

Given the investment horizon of 90 days Eos Energy is expected to generate 1.91 times less return on investment than Microvast Holdings. But when comparing it to its historical volatility, Eos Energy Enterprises is 4.14 times less risky than Microvast Holdings. It trades about 0.17 of its potential returns per unit of risk. Microvast Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  35.00  in Microvast Holdings on August 31, 2024 and sell it today you would earn a total of  49.00  from holding Microvast Holdings or generate 140.0% return on investment over 90 days.

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

Eos Energy Enterprises  vs.  Microvast Holdings

Eos Energy Enterprises

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eos Energy Enterprises are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Eos Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Microvast Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microvast Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Microvast Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eos Energy and Microvast Holdings

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

The idea behind Eos Energy Enterprises and Microvast Holdings 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.