Correlation Between Polestar Automotive and NFI

Can any of the company-specific risk be diversified away by investing in both Polestar Automotive and NFI 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 NFI 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 NFI Group, you can compare the effects of market volatilities on Polestar Automotive and NFI 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 NFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polestar Automotive and NFI.

Diversification Opportunities for Polestar Automotive and NFI

0.85

Correlation Coefficient

Polestar Automotive  NFI

Very poor diversification

The 3 months correlation between Polestar and NFI is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Polestar Automotive Holding and NFI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NFI Group 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 NFI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NFI Group has no effect on the direction of Polestar Automotive i.e., Polestar Automotive and NFI go up and down completely randomly.

Pair Corralation between Polestar Automotive and NFI

Given the investment horizon of 90 days Polestar Automotive Holding is expected to generate 2.93 times more return on investment than NFI. However, Polestar Automotive is 2.93 times more volatile than NFI Group. It trades about -0.06 of its potential returns per unit of risk. NFI Group is currently generating about -0.21 per unit of risk. If you would invest  151.00  in Polestar Automotive Holding on October 8, 2024 and sell it today you would lose (37.00) from holding Polestar Automotive Holding or give up 24.5% of portfolio value over 90 days.

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

Polestar Automotive Holding  vs.  NFI Group

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.

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.

Pair Trading with Polestar Automotive and NFI

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

The idea behind Polestar Automotive Holding and NFI 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.