Correlation Between Dowlais Group and Polestar Automotive

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

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

Diversification Opportunities for Dowlais Group and Polestar Automotive

0.72

Correlation Coefficient

Dowlais Group  Polestar Automotive

Poor diversification

The 3 months correlation between Dowlais and Polestar is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Dowlais Group plc and Polestar Automotive Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polestar Automotive and Dowlais Group 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 Dowlais Group plc 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 Dowlais Group i.e., Dowlais Group and Polestar Automotive go up and down completely randomly.

Pair Corralation between Dowlais Group and Polestar Automotive

Assuming the 90 days horizon Dowlais Group plc is expected to generate 0.24 times more return on investment than Polestar Automotive. However, Dowlais Group plc is 4.21 times less risky than Polestar Automotive. It trades about 0.32 of its potential returns per unit of risk. Polestar Automotive Holding is currently generating about -0.16 per unit of risk. If you would invest  65.00  in Dowlais Group plc on September 12, 2024 and sell it today you would earn a total of  8.00  from holding Dowlais Group plc or generate 12.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Dowlais Group plc  vs.  Polestar Automotive Holding

Dowlais Group plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dowlais Group plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Dowlais Group and Polestar Automotive

The main advantage of trading using opposite Dowlais Group and Polestar Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dowlais Group 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 Dowlais Group plc 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.