Correlation Between Solid Power and EVgo Equity

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

By analyzing existing cross correlation between Solid Power and EVgo Equity Warrants, you can compare the effects of market volatilities on Solid Power and EVgo Equity 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 EVgo Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solid Power and EVgo Equity.

Diversification Opportunities for Solid Power and EVgo Equity

-0.3

Correlation Coefficient

Solid Power  EVgo Equity

Very good diversification

The 3 months correlation between Solid and EVgo is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Solid Power and EVgo Equity Warrants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EVgo Equity Warrants 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 EVgo Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EVgo Equity Warrants has no effect on the direction of Solid Power i.e., Solid Power and EVgo Equity go up and down completely randomly.

Pair Corralation between Solid Power and EVgo Equity

Assuming the 90 days horizon Solid Power is expected to generate 18.44 times less return on investment than EVgo Equity. But when comparing it to its historical volatility, Solid Power is 2.09 times less risky than EVgo Equity. It trades about 0.02 of its potential returns per unit of risk. EVgo Equity Warrants is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  35.00  in EVgo Equity Warrants on September 13, 2024 and sell it today you would earn a total of  61.81  from holding EVgo Equity Warrants or generate 176.6% return on investment over 90 days.

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

Solid Power  vs.  EVgo Equity Warrants

Solid Power

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Solid Power are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Solid Power may actually be approaching a critical reversion point that can send shares even higher in January 2025.

EVgo Equity Warrants

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EVgo Equity Warrants are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, EVgo Equity showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solid Power and EVgo Equity

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

The idea behind Solid Power and EVgo Equity Warrants 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.