Correlation Between Polestar Automotive and GreenPower

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

Diversification Opportunities for Polestar Automotive and GreenPower

0.74

Correlation Coefficient

Polestar Automotive  GreenPower

Poor diversification

The 3 months correlation between Polestar and GreenPower is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Polestar Automotive Holding and GreenPower Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenPower Motor 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 GreenPower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenPower Motor has no effect on the direction of Polestar Automotive i.e., Polestar Automotive and GreenPower go up and down completely randomly.

Pair Corralation between Polestar Automotive and GreenPower

Assuming the 90 days horizon Polestar Automotive Holding is expected to under-perform the GreenPower. But the stock apears to be less risky and, when comparing its historical volatility, Polestar Automotive Holding is 1.1 times less risky than GreenPower. The stock trades about -0.04 of its potential returns per unit of risk. The GreenPower Motor is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  87.00  in GreenPower Motor on September 4, 2024 and sell it today you would earn a total of  10.00  from holding GreenPower Motor or generate 11.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Polestar Automotive Holding  vs.  GreenPower Motor

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 weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

GreenPower Motor

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GreenPower Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, GreenPower reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Polestar Automotive and GreenPower

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

The idea behind Polestar Automotive Holding and GreenPower Motor 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 Transaction History module to view history of all your transactions and understand their impact on performance.