Correlation Between Microvast Holdings and ESS Tech

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

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

Diversification Opportunities for Microvast Holdings and ESS Tech

0.76

Correlation Coefficient

Microvast Holdings  ESS Tech

Poor diversification

The 3 months correlation between Microvast and ESS is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Microvast Holdings and ESS Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESS Tech 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 ESS Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESS Tech has no effect on the direction of Microvast Holdings i.e., Microvast Holdings and ESS Tech go up and down completely randomly.

Pair Corralation between Microvast Holdings and ESS Tech

Given the investment horizon of 90 days Microvast Holdings is expected to under-perform the ESS Tech. In addition to that, Microvast Holdings is 1.03 times more volatile than ESS Tech. It trades about -0.14 of its total potential returns per unit of risk. ESS Tech is currently generating about -0.09 per unit of volatility. If you would invest  614.00  in ESS Tech on December 28, 2024 and sell it today you would lose (268.00) from holding ESS Tech or give up 43.65% of portfolio value over 90 days.

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

Microvast Holdings  vs.  ESS Tech

Microvast Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microvast Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

ESS Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days ESS Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Microvast Holdings and ESS Tech

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

The idea behind Microvast Holdings and ESS Tech 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.