Correlation Between Polestar Automotive and Guangzhou Automobile

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

Diversification Opportunities for Polestar Automotive and Guangzhou Automobile

-0.5

Correlation Coefficient

Polestar Automotive  Guangzhou Automobile

Very good diversification

The 3 months correlation between Polestar and Guangzhou is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Polestar Automotive Holding and Guangzhou Automobile Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Automobile 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 Guangzhou Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Automobile has no effect on the direction of Polestar Automotive i.e., Polestar Automotive and Guangzhou Automobile go up and down completely randomly.

Pair Corralation between Polestar Automotive and Guangzhou Automobile

Assuming the 90 days horizon Polestar Automotive Holding is expected to generate 2.14 times more return on investment than Guangzhou Automobile. However, Polestar Automotive is 2.14 times more volatile than Guangzhou Automobile Group. It trades about 0.05 of its potential returns per unit of risk. Guangzhou Automobile Group is currently generating about 0.02 per unit of risk. If you would invest  23.00  in Polestar Automotive Holding on October 23, 2024 and sell it today you would earn a total of  0.00  from holding Polestar Automotive Holding or generate 0.0% return on investment over 90 days.

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

Polestar Automotive Holding  vs.  Guangzhou Automobile Group

Polestar Automotive

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Polestar Automotive Holding are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Polestar Automotive showed solid returns over the last few months and may actually be approaching a breakup point.

Guangzhou Automobile

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Automobile Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Guangzhou Automobile may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Polestar Automotive and Guangzhou Automobile

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

The idea behind Polestar Automotive Holding and Guangzhou Automobile 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.