Correlation Between Polestar Automotive and Volkswagen

Can any of the company-specific risk be diversified away by investing in both Polestar Automotive and Volkswagen 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 Volkswagen 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 Volkswagen AG 110, you can compare the effects of market volatilities on Polestar Automotive and Volkswagen 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 Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polestar Automotive and Volkswagen.

Diversification Opportunities for Polestar Automotive and Volkswagen

0.54

Correlation Coefficient

Polestar Automotive  Volkswagen

Very weak diversification

The 3 months correlation between Polestar and Volkswagen is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Polestar Automotive Holding and Volkswagen AG 110 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG 110 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 Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG 110 has no effect on the direction of Polestar Automotive i.e., Polestar Automotive and Volkswagen go up and down completely randomly.

Pair Corralation between Polestar Automotive and Volkswagen

Assuming the 90 days horizon Polestar Automotive Holding is expected to generate 4.37 times more return on investment than Volkswagen. However, Polestar Automotive is 4.37 times more volatile than Volkswagen AG 110. It trades about 0.08 of its potential returns per unit of risk. Volkswagen AG 110 is currently generating about -0.43 per unit of risk. If you would invest  13.00  in Polestar Automotive Holding on March 21, 2024 and sell it today you would earn a total of  1.00  from holding Polestar Automotive Holding or generate 7.69% return on investment over 90 days.

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

Polestar Automotive Holding  vs.  Volkswagen AG 110

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 latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Volkswagen AG 110

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG 110 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Polestar Automotive and Volkswagen

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

The idea behind Polestar Automotive Holding and Volkswagen AG 110 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.