Correlation Between ECD Automotive and Quantumscape Corp

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

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

Diversification Opportunities for ECD Automotive and Quantumscape Corp

-0.44

Correlation Coefficient

ECD Automotive  Quantumscape Corp

Very good diversification

The 3 months correlation between ECD and Quantumscape is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding ECD Automotive Design and Quantumscape Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quantumscape Corp and ECD Automotive 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 ECD Automotive Design are associated (or correlated) with Quantumscape Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quantumscape Corp has no effect on the direction of ECD Automotive i.e., ECD Automotive and Quantumscape Corp go up and down completely randomly.

Pair Corralation between ECD Automotive and Quantumscape Corp

Given the investment horizon of 90 days ECD Automotive Design is expected to generate 2.3 times more return on investment than Quantumscape Corp. However, ECD Automotive is 2.3 times more volatile than Quantumscape Corp. It trades about 0.22 of its potential returns per unit of risk. Quantumscape Corp is currently generating about -0.05 per unit of risk. If you would invest  96.00  in ECD Automotive Design on February 5, 2024 and sell it today you would earn a total of  36.00  from holding ECD Automotive Design or generate 37.5% return on investment over 90 days.

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

ECD Automotive Design  vs.  Quantumscape Corp

ECD Automotive Design

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ECD Automotive Design are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal fundamental indicators, ECD Automotive sustained solid returns over the last few months and may actually be approaching a breakup point.

Quantumscape Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quantumscape Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with ECD Automotive and Quantumscape Corp

The main advantage of trading using opposite ECD Automotive and Quantumscape Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECD Automotive position performs unexpectedly, Quantumscape Corp 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 Quantumscape Corp will offset losses from the drop in Quantumscape Corp's long position.

The idea behind ECD Automotive Design and Quantumscape Corp 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 Stocks Directory module to find actively traded stocks across global markets.