Correlation Between Planet Labs and Eve Holding

Can any of the company-specific risk be diversified away by investing in both Planet Labs and Eve Holding 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 Planet Labs and Eve Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Planet Labs PBC and Eve Holding, you can compare the effects of market volatilities on Planet Labs and Eve Holding 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 Planet Labs with a short position of Eve Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Planet Labs and Eve Holding.

Diversification Opportunities for Planet Labs and Eve Holding

0.25

Correlation Coefficient

Planet Labs  Eve Holding

Modest diversification

The 3 months correlation between Planet and Eve is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Planet Labs PBC and Eve Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eve Holding and Planet Labs 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 Planet Labs PBC are associated (or correlated) with Eve Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eve Holding has no effect on the direction of Planet Labs i.e., Planet Labs and Eve Holding go up and down completely randomly.

Pair Corralation between Planet Labs and Eve Holding

Allowing for the 90-day total investment horizon Planet Labs PBC is expected to generate 1.27 times more return on investment than Eve Holding. However, Planet Labs is 1.27 times more volatile than Eve Holding. It trades about -0.01 of its potential returns per unit of risk. Eve Holding is currently generating about -0.11 per unit of risk. If you would invest  438.00  in Planet Labs PBC on December 27, 2024 and sell it today you would lose (55.00) from holding Planet Labs PBC or give up 12.56% of portfolio value over 90 days.

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

Planet Labs PBC  vs.  Eve Holding

Planet Labs PBC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Planet Labs PBC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Planet Labs is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Eve Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eve Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Planet Labs and Eve Holding

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

The idea behind Planet Labs PBC and Eve Holding 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.