Correlation Between Microvast Holdings and Renew Energy

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

Diversification Opportunities for Microvast Holdings and Renew Energy

-0.25

Correlation Coefficient

Microvast Holdings  Renew Energy

Very good diversification

The 3 months correlation between Microvast and Renew is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Microvast Holdings and Renew Energy Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renew Energy Global 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 Renew Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renew Energy Global has no effect on the direction of Microvast Holdings i.e., Microvast Holdings and Renew Energy go up and down completely randomly.

Pair Corralation between Microvast Holdings and Renew Energy

Assuming the 90 days horizon Microvast Holdings is expected to generate 13.76 times more return on investment than Renew Energy. However, Microvast Holdings is 13.76 times more volatile than Renew Energy Global. It trades about 0.17 of its potential returns per unit of risk. Renew Energy Global is currently generating about 0.07 per unit of risk. If you would invest  2.40  in Microvast Holdings on September 3, 2024 and sell it today you would earn a total of  7.60  from holding Microvast Holdings or generate 316.67% return on investment over 90 days.

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

Microvast Holdings  vs.  Renew Energy Global

Microvast Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Microvast Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Microvast Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Renew Energy Global

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Renew Energy Global are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Renew Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Microvast Holdings and Renew Energy

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

The idea behind Microvast Holdings and Renew Energy Global 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.