Correlation Between Polestar Automotive and Li Auto
Can any of the company-specific risk be diversified away by investing in both Polestar Automotive and Li Auto 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 Li Auto 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 Li Auto, you can compare the effects of market volatilities on Polestar Automotive and Li Auto 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 Li Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polestar Automotive and Li Auto.
Diversification Opportunities for Polestar Automotive and Li Auto
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Polestar and Li Auto is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Polestar Automotive Holding and Li Auto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Auto 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 Li Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Auto has no effect on the direction of Polestar Automotive i.e., Polestar Automotive and Li Auto go up and down completely randomly.
Pair Corralation between Polestar Automotive and Li Auto
Given the investment horizon of 90 days Polestar Automotive Holding is expected to under-perform the Li Auto. In addition to that, Polestar Automotive is 1.38 times more volatile than Li Auto. It trades about -0.04 of its total potential returns per unit of risk. Li Auto is currently generating about 0.02 per unit of volatility. If you would invest 2,211 in Li Auto on August 24, 2024 and sell it today you would earn a total of 49.00 from holding Li Auto or generate 2.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Polestar Automotive Holding vs. Li Auto
Performance |
| Timeline |
| Polestar Automotive |
| Li Auto |
Polestar Automotive and Li Auto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Polestar Automotive and Li Auto
The main advantage of trading using opposite Polestar Automotive and Li Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Polestar Automotive position performs unexpectedly, Li Auto 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 Li Auto will offset losses from the drop in Li Auto's long position.| Polestar Automotive vs. Lucid Group | Polestar Automotive vs. Rivian Automotive | Polestar Automotive vs. Canoo Inc | Polestar Automotive vs. Nio Class A |
Check out your portfolio center.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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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