Correlation Between Microvast Holdings and EVgo Equity

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

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

Diversification Opportunities for Microvast Holdings and EVgo Equity

-0.04

Correlation Coefficient

Microvast Holdings  EVgo Equity

Good diversification

The 3 months correlation between Microvast and EVgo is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Microvast Holdings 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 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 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 Microvast Holdings i.e., Microvast Holdings and EVgo Equity go up and down completely randomly.

Pair Corralation between Microvast Holdings and EVgo Equity

Assuming the 90 days horizon Microvast Holdings is expected to generate 1.18 times more return on investment than EVgo Equity. However, Microvast Holdings is 1.18 times more volatile than EVgo Equity Warrants. It trades about 0.15 of its potential returns per unit of risk. EVgo Equity Warrants is currently generating about 0.15 per unit of risk. If you would invest  2.40  in Microvast Holdings on August 31, 2024 and sell it today you would earn a total of  5.11  from holding Microvast Holdings or generate 212.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Microvast Holdings  vs.  EVgo Equity Warrants

Microvast Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Microvast Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Microvast Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

EVgo Equity Warrants

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EVgo Equity Warrants are ranked lower than 11 (%) 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 Microvast Holdings and EVgo Equity

The main advantage of trading using opposite Microvast Holdings and EVgo Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microvast Holdings 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 Microvast Holdings 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.