Correlation Between Solid Power and King Resources

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

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

Diversification Opportunities for Solid Power and King Resources

0.49

Correlation Coefficient

Solid Power  King Resources

Very weak diversification

The 3 months correlation between Solid and King is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Solid Power and King Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on King Resources and Solid Power 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 Solid Power are associated (or correlated) with King Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of King Resources has no effect on the direction of Solid Power i.e., Solid Power and King Resources go up and down completely randomly.

Pair Corralation between Solid Power and King Resources

Given the investment horizon of 90 days Solid Power is expected to under-perform the King Resources. But the stock apears to be less risky and, when comparing its historical volatility, Solid Power is 5.79 times less risky than King Resources. The stock trades about -0.05 of its potential returns per unit of risk. The King Resources is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.02  in King Resources on December 24, 2024 and sell it today you would lose (0.01) from holding King Resources or give up 50.0% of portfolio value over 90 days.

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

Solid Power  vs.  King Resources

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.

King Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in King Resources are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical and fundamental indicators, King Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solid Power and King Resources

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

The idea behind Solid Power and King Resources 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.