Correlation Between Freightcar America and Solid Power

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

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

Diversification Opportunities for Freightcar America and Solid Power

0.47

Correlation Coefficient

Freightcar America  Solid Power

Very weak diversification

The 3 months correlation between Freightcar and Solid is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Freightcar America and Solid Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solid Power and Freightcar America 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 Freightcar America 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 Freightcar America i.e., Freightcar America and Solid Power go up and down completely randomly.

Pair Corralation between Freightcar America and Solid Power

Given the investment horizon of 90 days Freightcar America is expected to generate 1.24 times more return on investment than Solid Power. However, Freightcar America is 1.24 times more volatile than Solid Power. It trades about -0.12 of its potential returns per unit of risk. Solid Power is currently generating about -0.24 per unit of risk. If you would invest  925.00  in Freightcar America on December 30, 2024 and sell it today you would lose (361.00) from holding Freightcar America or give up 39.03% of portfolio value over 90 days.

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

Freightcar America  vs.  Solid Power

Freightcar America

Risk-Adjusted Performance

Very Weak

Over the last 90 days Freightcar America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Solid Power

Risk-Adjusted Performance

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 fragile performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Freightcar America and Solid Power

The main advantage of trading using opposite Freightcar America and Solid Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freightcar America 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 Freightcar America 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.