Correlation Between Quantumscape Corp and Solid Power

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

By analyzing existing cross correlation between Quantumscape Corp and Solid Power, you can compare the effects of market volatilities on Quantumscape Corp and Solid 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 Quantumscape Corp with a short position of Solid Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quantumscape Corp and Solid Power.

Diversification Opportunities for Quantumscape Corp and Solid Power

0.82

Correlation Coefficient

Quantumscape Corp  Solid Power

Very poor diversification

The 3 months correlation between Quantumscape and Solid is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Quantumscape Corp and Solid Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solid Power and Quantumscape Corp 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 Quantumscape Corp are associated (or correlated) with Solid Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solid Power has no effect on the direction of Quantumscape Corp i.e., Quantumscape Corp and Solid Power go up and down completely randomly.

Pair Corralation between Quantumscape Corp and Solid Power

Allowing for the 90-day total investment horizon Quantumscape Corp is expected to under-perform the Solid Power. In addition to that, Quantumscape Corp is 1.26 times more volatile than Solid Power. It trades about -0.04 of its total potential returns per unit of risk. Solid Power is currently generating about -0.04 per unit of volatility. If you would invest  130.00  in Solid Power on September 12, 2024 and sell it today you would lose (16.00) from holding Solid Power or give up 12.31% of portfolio value over 90 days.

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

Quantumscape Corp  vs.  Solid Power

Quantumscape Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quantumscape Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Solid Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solid Power has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Quantumscape Corp and Solid Power

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

The idea behind Quantumscape Corp and Solid 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.