Correlation Between Faraday Future and Solid Power

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

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

Diversification Opportunities for Faraday Future and Solid Power

0.66

Correlation Coefficient

Faraday Future  Solid Power

Poor diversification

The 3 months correlation between Faraday and Solid is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Faraday Future Intelligent and Solid Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solid Power and Faraday Future 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 Faraday Future Intelligent 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 Faraday Future i.e., Faraday Future and Solid Power go up and down completely randomly.

Pair Corralation between Faraday Future and Solid Power

Given the investment horizon of 90 days Faraday Future is expected to generate 1.1 times less return on investment than Solid Power. In addition to that, Faraday Future is 2.45 times more volatile than Solid Power. It trades about 0.14 of its total potential returns per unit of risk. Solid Power is currently generating about 0.37 per unit of volatility. If you would invest  94.00  in Solid Power on February 7, 2025 and sell it today you would earn a total of  33.00  from holding Solid Power or generate 35.11% return on investment over 90 days.

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

Faraday Future Intelligent  vs.  Solid Power

Faraday Future Intel

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Faraday Future Intelligent are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Faraday Future may actually be approaching a critical reversion point that can send shares even higher in June 2025.

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 relatively invariable fundamental indicators, Solid Power is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Faraday Future and Solid Power

The main advantage of trading using opposite Faraday Future and Solid Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Faraday Future 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 Faraday Future Intelligent 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.