Correlation Between NFI and Polestar Automotive

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

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

Diversification Opportunities for NFI and Polestar Automotive

0.75

Correlation Coefficient

NFI  Polestar Automotive

Poor diversification

The 3 months correlation between NFI and Polestar is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding NFI 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 NFI 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 NFI 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 NFI i.e., NFI and Polestar Automotive go up and down completely randomly.

Pair Corralation between NFI and Polestar Automotive

Assuming the 90 days horizon NFI Group is expected to generate 0.54 times more return on investment than Polestar Automotive. However, NFI Group is 1.84 times less risky than Polestar Automotive. It trades about 0.02 of its potential returns per unit of risk. Polestar Automotive Holding is currently generating about -0.04 per unit of risk. If you would invest  810.00  in NFI Group on October 23, 2024 and sell it today you would earn a total of  118.00  from holding NFI Group or generate 14.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

NFI Group  vs.  Polestar Automotive Holding

NFI Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NFI Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with NFI and Polestar Automotive

The main advantage of trading using opposite NFI and Polestar Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NFI 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 NFI 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.