Correlation Between Polestar Automotive and Dowlais Group

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

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

Diversification Opportunities for Polestar Automotive and Dowlais Group

0.12

Correlation Coefficient

Polestar Automotive  Dowlais Group

Average diversification

The 3 months correlation between Polestar and Dowlais is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Polestar Automotive Holding and Dowlais Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dowlais Group plc and Polestar Automotive 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 Polestar Automotive Holding are associated (or correlated) with Dowlais Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dowlais Group plc has no effect on the direction of Polestar Automotive i.e., Polestar Automotive and Dowlais Group go up and down completely randomly.

Pair Corralation between Polestar Automotive and Dowlais Group

Given the investment horizon of 90 days Polestar Automotive is expected to generate 3.14 times less return on investment than Dowlais Group. In addition to that, Polestar Automotive is 2.16 times more volatile than Dowlais Group plc. It trades about 0.03 of its total potential returns per unit of risk. Dowlais Group plc is currently generating about 0.23 per unit of volatility. If you would invest  73.00  in Dowlais Group plc on October 8, 2024 and sell it today you would earn a total of  8.00  from holding Dowlais Group plc or generate 10.96% return on investment over 90 days.

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

Polestar Automotive Holding  vs.  Dowlais Group plc

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 unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Dowlais Group plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dowlais Group plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Dowlais Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Polestar Automotive and Dowlais Group

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

The idea behind Polestar Automotive Holding and Dowlais Group plc 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 Global Correlations module to find global opportunities by holding instruments from different markets.