Correlation Between Microvast Holdings and Eos Energy

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

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

Diversification Opportunities for Microvast Holdings and Eos Energy

-0.47

Correlation Coefficient

Microvast Holdings  Eos Energy

Very good diversification

The 3 months correlation between Microvast and Eos is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Microvast Holdings and Eos Energy Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eos Energy Enterprises and Microvast Holdings 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 Microvast Holdings are associated (or correlated) with Eos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eos Energy Enterprises has no effect on the direction of Microvast Holdings i.e., Microvast Holdings and Eos Energy go up and down completely randomly.

Pair Corralation between Microvast Holdings and Eos Energy

Assuming the 90 days horizon Microvast Holdings is expected to generate 2.18 times more return on investment than Eos Energy. However, Microvast Holdings is 2.18 times more volatile than Eos Energy Enterprises. It trades about 0.15 of its potential returns per unit of risk. Eos Energy Enterprises is currently generating about 0.06 per unit of risk. If you would invest  2.40  in Microvast Holdings on September 2, 2024 and sell it today you would earn a total of  5.11  from holding Microvast Holdings or generate 212.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Microvast Holdings  vs.  Eos Energy Enterprises

Microvast Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Microvast Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Microvast Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

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 fairly unsteady technical and fundamental indicators, Eos Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microvast Holdings and Eos Energy

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

The idea behind Microvast Holdings and Eos Energy Enterprises 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.