Correlation Between Microvast Holdings and Solid Power

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

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

Diversification Opportunities for Microvast Holdings and Solid Power

-0.59

Correlation Coefficient

Microvast Holdings  Solid Power

Excellent diversification

The 3 months correlation between Microvast and Solid is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Microvast Holdings and Solid Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solid Power 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 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 Microvast Holdings i.e., Microvast Holdings and Solid Power go up and down completely randomly.

Pair Corralation between Microvast Holdings and Solid Power

Assuming the 90 days horizon Microvast Holdings is expected to generate 11.5 times more return on investment than Solid Power. However, Microvast Holdings is 11.5 times more volatile than Solid Power. It trades about 0.32 of its potential returns per unit of risk. Solid Power is currently generating about 0.14 per unit of risk. If you would invest  2.50  in Microvast Holdings on September 13, 2024 and sell it today you would earn a total of  13.50  from holding Microvast Holdings or generate 540.0% return on investment over 90 days.

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

Microvast Holdings  vs.  Solid Power

Microvast Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Microvast Holdings are ranked lower than 16 (%) 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.

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 latest fragile performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Microvast Holdings and Solid Power

The main advantage of trading using opposite Microvast Holdings and Solid Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microvast Holdings 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 Microvast Holdings 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.