Correlation Between Vast Renewables and Solid Power

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

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

Diversification Opportunities for Vast Renewables and Solid Power

-0.33

Correlation Coefficient

Vast Renewables  Solid Power

Very good diversification

The 3 months correlation between Vast and Solid is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Vast Renewables Limited and Solid Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solid Power and Vast Renewables 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 Vast Renewables Limited 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 Vast Renewables i.e., Vast Renewables and Solid Power go up and down completely randomly.

Pair Corralation between Vast Renewables and Solid Power

Given the investment horizon of 90 days Vast Renewables Limited is expected to under-perform the Solid Power. In addition to that, Vast Renewables is 1.07 times more volatile than Solid Power. It trades about -0.25 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  116.00  in Solid Power on November 28, 2024 and sell it today you would earn a total of  4.00  from holding Solid Power or generate 3.45% return on investment over 90 days.

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

Vast Renewables Limited  vs.  Solid Power

Vast Renewables

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vast Renewables Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Solid Power

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Solid Power are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile fundamental indicators, Solid Power reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vast Renewables and Solid Power

The main advantage of trading using opposite Vast Renewables and Solid Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vast Renewables 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 Vast Renewables Limited 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.