Correlation Between Microvast Holdings and Plug Power

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

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

Diversification Opportunities for Microvast Holdings and Plug Power

0.15

Correlation Coefficient

Microvast Holdings  Plug Power

Average diversification

The 3 months correlation between Microvast and Plug is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Microvast Holdings and Plug Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plug Power 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 Plug Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plug Power has no effect on the direction of Microvast Holdings i.e., Microvast Holdings and Plug Power go up and down completely randomly.

Pair Corralation between Microvast Holdings and Plug Power

Assuming the 90 days horizon Microvast Holdings is expected to generate 2.54 times more return on investment than Plug Power. However, Microvast Holdings is 2.54 times more volatile than Plug Power. It trades about 0.02 of its potential returns per unit of risk. Plug Power is currently generating about -0.16 per unit of risk. If you would invest  31.00  in Microvast Holdings on November 29, 2024 and sell it today you would lose (2.01) from holding Microvast Holdings or give up 6.48% of portfolio value over 90 days.

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

Microvast Holdings  vs.  Plug Power

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 fairly uncertain basic indicators, Microvast Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Plug Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days Plug Power 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 nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Microvast Holdings and Plug Power

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

The idea behind Microvast Holdings and Plug Power 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.