Correlation Between Porsche Automobile and LiveWire

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

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

Diversification Opportunities for Porsche Automobile and LiveWire

0.34

Correlation Coefficient

Porsche Automobile  LiveWire

Weak diversification

The 3 months correlation between Porsche and LiveWire is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Porsche Automobile Holding and LiveWire Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LiveWire Group and Porsche 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 Porsche Automobile Holding are associated (or correlated) with LiveWire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LiveWire Group has no effect on the direction of Porsche Automobile i.e., Porsche Automobile and LiveWire go up and down completely randomly.

Pair Corralation between Porsche Automobile and LiveWire

Assuming the 90 days horizon Porsche Automobile Holding is expected to generate 0.48 times more return on investment than LiveWire. However, Porsche Automobile Holding is 2.1 times less risky than LiveWire. It trades about -0.11 of its potential returns per unit of risk. LiveWire Group is currently generating about -0.15 per unit of risk. If you would invest  429.00  in Porsche Automobile Holding on October 25, 2024 and sell it today you would lose (49.00) from holding Porsche Automobile Holding or give up 11.42% of portfolio value over 90 days.

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

Porsche Automobile Holding  vs.  LiveWire Group

Porsche Automobile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Porsche Automobile Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

LiveWire Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LiveWire Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Porsche Automobile and LiveWire

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

The idea behind Porsche Automobile Holding and LiveWire Group 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.