Correlation Between Volcon and Polestar Automotive

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

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

Diversification Opportunities for Volcon and Polestar Automotive

0.03

Correlation Coefficient

Volcon  Polestar Automotive

Significant diversification

The 3 months correlation between Volcon and Polestar is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Volcon Inc and Polestar Automotive Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polestar Automotive and Volcon 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 Volcon Inc are associated (or correlated) with Polestar Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polestar Automotive has no effect on the direction of Volcon i.e., Volcon and Polestar Automotive go up and down completely randomly.

Pair Corralation between Volcon and Polestar Automotive

Given the investment horizon of 90 days Volcon Inc is expected to under-perform the Polestar Automotive. But the stock apears to be less risky and, when comparing its historical volatility, Volcon Inc is 1.66 times less risky than Polestar Automotive. The stock trades about -0.27 of its potential returns per unit of risk. The Polestar Automotive Holding is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Polestar Automotive Holding on December 29, 2024 and sell it today you would earn a total of  4.00  from holding Polestar Automotive Holding or generate 28.57% return on investment over 90 days.

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

Volcon Inc  vs.  Polestar Automotive Holding

Volcon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Volcon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Polestar Automotive

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Polestar Automotive Holding are ranked lower than 5 (%) 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.

Pair Trading with Volcon and Polestar Automotive

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

The idea behind Volcon Inc and Polestar Automotive Holding 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.