Correlation Between Microvast Holdings and Faraday Future

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

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

Diversification Opportunities for Microvast Holdings and Faraday Future

0.69

Correlation Coefficient

Microvast Holdings  Faraday Future

Poor diversification

The 3 months correlation between Microvast and Faraday is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Microvast Holdings and Faraday Future Intelligent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faraday Future Intel 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 Faraday Future. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faraday Future Intel has no effect on the direction of Microvast Holdings i.e., Microvast Holdings and Faraday Future go up and down completely randomly.

Pair Corralation between Microvast Holdings and Faraday Future

Assuming the 90 days horizon Microvast Holdings is expected to generate 1.16 times more return on investment than Faraday Future. However, Microvast Holdings is 1.16 times more volatile than Faraday Future Intelligent. It trades about 0.26 of its potential returns per unit of risk. Faraday Future Intelligent is currently generating about 0.16 per unit of risk. If you would invest  2.21  in Microvast Holdings on October 9, 2024 and sell it today you would earn a total of  40.79  from holding Microvast Holdings or generate 1845.7% return on investment over 90 days.

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

Microvast Holdings  vs.  Faraday Future Intelligent

Microvast Holdings

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Microvast Holdings are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Microvast Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Faraday Future Intel

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Faraday Future Intelligent are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Faraday Future showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microvast Holdings and Faraday Future

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

The idea behind Microvast Holdings and Faraday Future Intelligent 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.