Correlation Between Plug Power and Solid Power

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

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

Diversification Opportunities for Plug Power and Solid Power

0.89

Correlation Coefficient

Plug Power  Solid Power

Very poor diversification

The 3 months correlation between Plug and Solid is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Plug Power and Solid Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solid Power and Plug 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 Plug Power 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 Plug Power i.e., Plug Power and Solid Power go up and down completely randomly.

Pair Corralation between Plug Power and Solid Power

Given the investment horizon of 90 days Plug Power is expected to generate 1.26 times less return on investment than Solid Power. In addition to that, Plug Power is 1.41 times more volatile than Solid Power. It trades about 0.19 of its total potential returns per unit of risk. Solid Power is currently generating about 0.33 per unit of volatility. If you would invest  113.00  in Solid Power on April 20, 2025 and sell it today you would earn a total of  264.00  from holding Solid Power or generate 233.63% return on investment over 90 days.

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

Plug Power  vs.  Solid Power

Plug Power

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Plug Power are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Plug Power reported solid returns over the last few months and may actually be approaching a breakup point.

Solid Power

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Solid Power are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain fundamental indicators, Solid Power reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Plug Power and Solid Power

The main advantage of trading using opposite Plug Power and Solid Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plug Power 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 Plug Power 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..