Correlation Between Microvast Holdings and King Resources

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

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

Diversification Opportunities for Microvast Holdings and King Resources

0.23

Correlation Coefficient

Microvast Holdings  King Resources

Modest diversification

The 3 months correlation between Microvast and King is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Microvast Holdings and King Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on King Resources 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 King Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of King Resources has no effect on the direction of Microvast Holdings i.e., Microvast Holdings and King Resources go up and down completely randomly.

Pair Corralation between Microvast Holdings and King Resources

Given the investment horizon of 90 days Microvast Holdings is expected to generate 2.15 times less return on investment than King Resources. But when comparing it to its historical volatility, Microvast Holdings is 1.21 times less risky than King Resources. It trades about 0.08 of its potential returns per unit of risk. King Resources is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.03  in King Resources on September 14, 2024 and sell it today you would lose (0.01) from holding King Resources or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.21%
Values	Daily Returns

Microvast Holdings  vs.  King Resources

Microvast Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microvast Holdings are ranked lower than 10 (%) 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.

King Resources

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in King Resources are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical and fundamental indicators, King Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microvast Holdings and King Resources

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

The idea behind Microvast Holdings and King Resources 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.