Correlation Between Lucid and Polestar Automotive

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

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

Diversification Opportunities for Lucid and Polestar Automotive

0.7

Correlation Coefficient

Lucid  Polestar Automotive

Poor diversification

The 3 months correlation between Lucid and Polestar is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Lucid 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 Lucid 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 Lucid 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 Lucid i.e., Lucid and Polestar Automotive go up and down completely randomly.

Pair Corralation between Lucid and Polestar Automotive

Given the investment horizon of 90 days Lucid Group is expected to under-perform the Polestar Automotive. But the stock apears to be less risky and, when comparing its historical volatility, Lucid Group is 1.8 times less risky than Polestar Automotive. The stock trades about -0.2 of its potential returns per unit of risk. The Polestar Automotive Holding is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  20.00  in Polestar Automotive Holding on September 4, 2024 and sell it today you would lose (6.00) from holding Polestar Automotive Holding or give up 30.0% of portfolio value over 90 days.

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

Lucid Group  vs.  Polestar Automotive Holding

Lucid Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lucid Group 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 forward indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Polestar Automotive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Polestar Automotive Holding 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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Lucid and Polestar Automotive

The main advantage of trading using opposite Lucid and Polestar Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lucid 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 Lucid 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 CEOs Directory module to screen CEOs from public companies around the world.