Correlation Between Guangzhou Automobile and Polestar Automotive

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

By analyzing existing cross correlation between Guangzhou Automobile Group and Polestar Automotive Holding, you can compare the effects of market volatilities on Guangzhou Automobile and Polestar Automotive 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 Guangzhou Automobile with a short position of Polestar Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Automobile and Polestar Automotive.

Diversification Opportunities for Guangzhou Automobile and Polestar Automotive

-0.27

Correlation Coefficient

Guangzhou Automobile  Polestar Automotive

Very good diversification

The 3 months correlation between Guangzhou and Polestar is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Automobile Group and Polestar Automotive Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polestar Automotive and Guangzhou Automobile 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 Guangzhou Automobile Group are associated (or correlated) with Polestar Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polestar Automotive has no effect on the direction of Guangzhou Automobile i.e., Guangzhou Automobile and Polestar Automotive go up and down completely randomly.

Pair Corralation between Guangzhou Automobile and Polestar Automotive

Assuming the 90 days horizon Guangzhou Automobile is expected to generate 3.1 times less return on investment than Polestar Automotive. In addition to that, Guangzhou Automobile is 1.21 times more volatile than Polestar Automotive Holding. It trades about 0.0 of its total potential returns per unit of risk. Polestar Automotive Holding is currently generating about 0.01 per unit of volatility. If you would invest  108.00  in Polestar Automotive Holding on December 23, 2024 and sell it today you would lose (1.00) from holding Polestar Automotive Holding or give up 0.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Guangzhou Automobile Group  vs.  Polestar Automotive Holding

Guangzhou Automobile

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangzhou Automobile Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Guangzhou Automobile is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Polestar Automotive

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Polestar Automotive Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Polestar Automotive is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guangzhou Automobile and Polestar Automotive

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

The idea behind Guangzhou Automobile Group and Polestar Automotive Holding 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.