Correlation Between Eos Energy and Solid Power

Can any of the company-specific risk be diversified away by investing in both Eos Energy and Solid Power 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 Solid Power 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 Solid Power, you can compare the effects of market volatilities on Eos Energy and Solid Power 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 Solid Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eos Energy and Solid Power.

Diversification Opportunities for Eos Energy and Solid Power

0.09

Correlation Coefficient

Eos Energy  Solid Power

Significant diversification

The 3 months correlation between Eos and Solid is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Eos Energy Enterprises and Solid Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solid Power 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 Solid Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solid Power has no effect on the direction of Eos Energy i.e., Eos Energy and Solid Power go up and down completely randomly.

Pair Corralation between Eos Energy and Solid Power

Given the investment horizon of 90 days Eos Energy Enterprises is expected to generate 1.52 times more return on investment than Solid Power. However, Eos Energy is 1.52 times more volatile than Solid Power. It trades about 0.04 of its potential returns per unit of risk. Solid Power is currently generating about -0.01 per unit of risk. If you would invest  284.00  in Eos Energy Enterprises on August 31, 2024 and sell it today you would earn a total of  11.00  from holding Eos Energy Enterprises or generate 3.87% return on investment over 90 days.

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

Eos Energy Enterprises  vs.  Solid Power

Eos Energy Enterprises

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eos Energy Enterprises are ranked lower than 6 (%) 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.

Solid Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solid Power has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Eos Energy and Solid Power

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

The idea behind Eos Energy Enterprises and Solid Power 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.