Correlation Between Li AutoInc and Polestar Automotive
Can any of the company-specific risk be diversified away by investing in both Li AutoInc 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 Li AutoInc and Polestar Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Li AutoInc and Polestar Automotive Holding, you can compare the effects of market volatilities on Li AutoInc 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 Li AutoInc with a short position of Polestar Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Li AutoInc and Polestar Automotive.
Diversification Opportunities for Li AutoInc and Polestar Automotive
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Li AutoInc and Polestar is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Li AutoInc and Polestar Automotive Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polestar Automotive and Li AutoInc 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 Li AutoInc 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 Li AutoInc i.e., Li AutoInc and Polestar Automotive go up and down completely randomly.
Pair Corralation between Li AutoInc and Polestar Automotive
Allowing for the 90-day total investment horizon Li AutoInc is expected to generate 0.87 times more return on investment than Polestar Automotive. However, Li AutoInc is 1.16 times less risky than Polestar Automotive. It trades about 0.03 of its potential returns per unit of risk. Polestar Automotive Holding is currently generating about -0.07 per unit of risk. If you would invest 2,013 in Li AutoInc on January 31, 2024 and sell it today you would earn a total of 682.00 from holding Li AutoInc or generate 33.88% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Li AutoInc vs. Polestar Automotive Holding
Performance |
Timeline |
Li AutoInc |
Polestar Automotive |
Li AutoInc and Polestar Automotive Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Li AutoInc and Polestar Automotive
The main advantage of trading using opposite Li AutoInc and Polestar Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Li AutoInc 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 Li AutoInc 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.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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
Bonds Directory Find actively traded corporate debentures issued by US companies | |
Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes |