Correlation Between Volcon and Envirotech Vehicles

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

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

Diversification Opportunities for Volcon and Envirotech Vehicles

0.44

Correlation Coefficient

Volcon  Envirotech Vehicles

Very weak diversification

The 3 months correlation between Volcon and Envirotech is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Volcon Inc and Envirotech Vehicles in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Envirotech Vehicles and Volcon 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 Volcon Inc are associated (or correlated) with Envirotech Vehicles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Envirotech Vehicles has no effect on the direction of Volcon i.e., Volcon and Envirotech Vehicles go up and down completely randomly.

Pair Corralation between Volcon and Envirotech Vehicles

Given the investment horizon of 90 days Volcon Inc is expected to under-perform the Envirotech Vehicles. In addition to that, Volcon is 1.91 times more volatile than Envirotech Vehicles. It trades about -0.16 of its total potential returns per unit of risk. Envirotech Vehicles is currently generating about -0.01 per unit of volatility. If you would invest  159.00  in Envirotech Vehicles on September 4, 2024 and sell it today you would lose (11.00) from holding Envirotech Vehicles or give up 6.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Volcon Inc  vs.  Envirotech Vehicles

Volcon Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volcon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Envirotech Vehicles

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Envirotech Vehicles has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Envirotech Vehicles is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Volcon and Envirotech Vehicles

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

The idea behind Volcon Inc and Envirotech Vehicles 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.