Correlation Between Freightcar America and Solid Power

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

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

Diversification Opportunities for Freightcar America and Solid Power

0.88

Correlation Coefficient

Freightcar America  Solid Power

Very poor diversification

The 3 months correlation between Freightcar and Solid is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Freightcar America and Solid Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solid Power and Freightcar America 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 Freightcar America 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 Freightcar America i.e., Freightcar America and Solid Power go up and down completely randomly.

Pair Corralation between Freightcar America and Solid Power

Given the investment horizon of 90 days Freightcar America is expected to generate 2.28 times less return on investment than Solid Power. But when comparing it to its historical volatility, Freightcar America is 1.54 times less risky than Solid Power. It trades about 0.17 of its potential returns per unit of risk. Solid Power is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  113.00  in Solid Power on May 5, 2025 and sell it today you would earn a total of  198.00  from holding Solid Power or generate 175.22% return on investment over 90 days.

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

Freightcar America  vs.  Solid Power

Freightcar America

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Freightcar America are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Freightcar America disclosed solid returns over the last few months and may actually be approaching a breakup point.

Solid Power

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Solid Power are ranked lower than 20 (%) 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 Freightcar America and Solid Power

The main advantage of trading using opposite Freightcar America and Solid Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freightcar America 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 Freightcar America 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..