Correlation Between Solid Power and Microvast Holdings

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

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

Diversification Opportunities for Solid Power and Microvast Holdings

-0.59

Correlation Coefficient

Solid Power  Microvast Holdings

Excellent diversification

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

Pair Corralation between Solid Power and Microvast Holdings

Given the investment horizon of 90 days Solid Power is expected to under-perform the Microvast Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Solid Power is 8.27 times less risky than Microvast Holdings. The stock trades about -0.06 of its potential returns per unit of risk. The Microvast Holdings is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1.81  in Microvast Holdings on September 14, 2024 and sell it today you would earn a total of  12.19  from holding Microvast Holdings or generate 673.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Solid Power  vs.  Microvast Holdings

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 January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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.

Pair Trading with Solid Power and Microvast Holdings

The main advantage of trading using opposite Solid Power and Microvast Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solid Power 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 Solid Power 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.