Correlation Between Encore Wire and Microvast Holdings
Can any of the company-specific risk be diversified away by investing in both Encore Wire and Microvast Holdings 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 Encore Wire and Microvast Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Encore Wire and Microvast Holdings, you can compare the effects of market volatilities on Encore Wire and Microvast Holdings 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 Encore Wire with a short position of Microvast Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Encore Wire and Microvast Holdings.
Diversification Opportunities for Encore Wire and Microvast Holdings
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Encore and Microvast is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Encore Wire and Microvast Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microvast Holdings and Encore Wire 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 Encore Wire are associated (or correlated) with Microvast Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microvast Holdings has no effect on the direction of Encore Wire i.e., Encore Wire and Microvast Holdings go up and down completely randomly.
Pair Corralation between Encore Wire and Microvast Holdings
Given the investment horizon of 90 days Encore Wire is expected to generate 2.18 times less return on investment than Microvast Holdings. But when comparing it to its historical volatility, Encore Wire is 7.57 times less risky than Microvast Holdings. It trades about 0.1 of its potential returns per unit of risk. Microvast Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 161.00 in Microvast Holdings on August 31, 2024 and sell it today you would lose (85.00) from holding Microvast Holdings or give up 52.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 78.03% |
| Values | Daily Returns |
Encore Wire vs. Microvast Holdings
Performance |
| Timeline |
| Encore Wire |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Microvast Holdings |
Encore Wire and Microvast Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Encore Wire and Microvast Holdings
The main advantage of trading using opposite Encore Wire and Microvast Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encore Wire position performs unexpectedly, Microvast Holdings 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 Microvast Holdings will offset losses from the drop in Microvast Holdings' long position.| Encore Wire vs. Advanced Energy Industries | Encore Wire vs. Acuity Brands | Encore Wire vs. Enersys | Encore Wire vs. nVent Electric PLC |
| Microvast Holdings vs. FREYR Battery SA | Microvast Holdings vs. Bloom Energy Corp | Microvast Holdings vs. Enovix Corp | Microvast Holdings vs. Plug Power |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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