Correlation Between Shoals Technologies and Microvast Holdings

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

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

Diversification Opportunities for Shoals Technologies and Microvast Holdings

0.39

Correlation Coefficient

Shoals Technologies  Microvast Holdings

Weak diversification

The 3 months correlation between Shoals and Microvast is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Shoals Technologies Group and Microvast Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microvast Holdings and Shoals Technologies 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 Shoals Technologies Group 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 Shoals Technologies i.e., Shoals Technologies and Microvast Holdings go up and down completely randomly.

Pair Corralation between Shoals Technologies and Microvast Holdings

Given the investment horizon of 90 days Shoals Technologies Group is expected to under-perform the Microvast Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Shoals Technologies Group is 1.49 times less risky than Microvast Holdings. The stock trades about -0.03 of its potential returns per unit of risk. The Microvast Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  157.00  in Microvast Holdings on February 3, 2025 and sell it today you would earn a total of  48.00  from holding Microvast Holdings or generate 30.57% return on investment over 90 days.

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

Shoals Technologies Group  vs.  Microvast Holdings

Shoals Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shoals Technologies Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Microvast Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microvast Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Microvast Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shoals Technologies and Microvast Holdings

The main advantage of trading using opposite Shoals Technologies and Microvast Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shoals Technologies 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.

The idea behind Shoals Technologies Group and Microvast Holdings 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.