Correlation Between Microvast Holdings and FREYR Battery

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

By analyzing existing cross correlation between Microvast Holdings and FREYR Battery SA, you can compare the effects of market volatilities on Microvast Holdings and FREYR Battery 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 FREYR Battery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microvast Holdings and FREYR Battery.

Diversification Opportunities for Microvast Holdings and FREYR Battery

0.36

Correlation Coefficient

Microvast Holdings  FREYR Battery

Weak diversification

The 3 months correlation between Microvast and FREYR is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Microvast Holdings and FREYR Battery SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FREYR Battery SA 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 FREYR Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FREYR Battery SA has no effect on the direction of Microvast Holdings i.e., Microvast Holdings and FREYR Battery go up and down completely randomly.

Pair Corralation between Microvast Holdings and FREYR Battery

Given the investment horizon of 90 days Microvast Holdings is expected to generate 1.88 times more return on investment than FREYR Battery. However, Microvast Holdings is 1.88 times more volatile than FREYR Battery SA. It trades about 0.22 of its potential returns per unit of risk. FREYR Battery SA is currently generating about 0.01 per unit of risk. If you would invest  62.00  in Microvast Holdings on November 19, 2024 and sell it today you would earn a total of  147.00  from holding Microvast Holdings or generate 237.1% return on investment over 90 days.

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

Microvast Holdings  vs.  FREYR Battery SA

Microvast Holdings

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Microvast Holdings are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Microvast Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

FREYR Battery SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days FREYR Battery SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, FREYR Battery is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microvast Holdings and FREYR Battery

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

The idea behind Microvast Holdings and FREYR Battery SA 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.