Correlation Between RLX Technology and Polaris Industries

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

By analyzing existing cross correlation between RLX Technology and Polaris Industries, you can compare the effects of market volatilities on RLX Technology and Polaris Industries 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 RLX Technology with a short position of Polaris Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLX Technology and Polaris Industries.

Diversification Opportunities for RLX Technology and Polaris Industries

0.25

Correlation Coefficient

RLX Technology  Polaris Industries

Modest diversification

The 3 months correlation between RLX and Polaris is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding RLX Technology and Polaris Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polaris Industries and RLX Technology 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 RLX Technology are associated (or correlated) with Polaris Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polaris Industries has no effect on the direction of RLX Technology i.e., RLX Technology and Polaris Industries go up and down completely randomly.

Pair Corralation between RLX Technology and Polaris Industries

Considering the 90-day investment horizon RLX Technology is expected to generate 2.36 times more return on investment than Polaris Industries. However, RLX Technology is 2.36 times more volatile than Polaris Industries. It trades about 0.02 of its potential returns per unit of risk. Polaris Industries is currently generating about 0.0 per unit of risk. If you would invest  185.00  in RLX Technology on January 26, 2024 and sell it today you would earn a total of  2.00  from holding RLX Technology or generate 1.08% return on investment over 90 days.

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

RLX Technology  vs.  Polaris Industries

RLX Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RLX Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, RLX Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Polaris Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Polaris Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Polaris Industries is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with RLX Technology and Polaris Industries

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

The idea behind RLX Technology and Polaris Industries 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 Global Correlations module to find global opportunities by holding instruments from different markets.