Correlation Between Microvast Holdings and AYRO

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

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

Diversification Opportunities for Microvast Holdings and AYRO

0.8

Correlation Coefficient

Microvast Holdings  AYRO

Very poor diversification

The 3 months correlation between Microvast and AYRO is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Microvast Holdings and AYRO Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AYRO Inc and Microvast Holdings 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 Microvast Holdings are associated (or correlated) with AYRO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AYRO Inc has no effect on the direction of Microvast Holdings i.e., Microvast Holdings and AYRO go up and down completely randomly.

Pair Corralation between Microvast Holdings and AYRO

Assuming the 90 days horizon Microvast Holdings is expected to generate 2.27 times more return on investment than AYRO. However, Microvast Holdings is 2.27 times more volatile than AYRO Inc. It trades about -0.06 of its potential returns per unit of risk. AYRO Inc is currently generating about -0.43 per unit of risk. If you would invest  4.00  in Microvast Holdings on February 2, 2024 and sell it today you would lose (0.63) from holding Microvast Holdings or give up 15.75% of portfolio value over 90 days.

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

Microvast Holdings  vs.  AYRO Inc

Microvast Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microvast Holdings 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 fairly stable which may send shares a bit higher in June 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

AYRO Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AYRO Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Microvast Holdings and AYRO

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

The idea behind Microvast Holdings and AYRO Inc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.