Correlation Between Life Electric and Porsche Automobil

Can any of the company-specific risk be diversified away by investing in both Life Electric and Porsche Automobil 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 Life Electric and Porsche Automobil into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Life Electric Vehicles and Porsche Automobil Holding, you can compare the effects of market volatilities on Life Electric and Porsche Automobil 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 Life Electric with a short position of Porsche Automobil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Electric and Porsche Automobil.

Diversification Opportunities for Life Electric and Porsche Automobil

0.37

Correlation Coefficient

Life Electric  Porsche Automobil

Weak diversification

The 3 months correlation between Life and Porsche is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Life Electric Vehicles and Porsche Automobil Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Porsche Automobil Holding and Life Electric 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 Life Electric Vehicles are associated (or correlated) with Porsche Automobil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Porsche Automobil Holding has no effect on the direction of Life Electric i.e., Life Electric and Porsche Automobil go up and down completely randomly.

Pair Corralation between Life Electric and Porsche Automobil

Given the investment horizon of 90 days Life Electric Vehicles is expected to generate 5.76 times more return on investment than Porsche Automobil. However, Life Electric is 5.76 times more volatile than Porsche Automobil Holding. It trades about 0.03 of its potential returns per unit of risk. Porsche Automobil Holding is currently generating about -0.12 per unit of risk. If you would invest  35.00  in Life Electric Vehicles on September 4, 2024 and sell it today you would lose (10.00) from holding Life Electric Vehicles or give up 28.57% of portfolio value over 90 days.

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

Life Electric Vehicles  vs.  Porsche Automobil Holding

Life Electric Vehicles

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Life Electric Vehicles are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Life Electric showed solid returns over the last few months and may actually be approaching a breakup point.

Porsche Automobil Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Porsche Automobil Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Life Electric and Porsche Automobil

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

The idea behind Life Electric Vehicles and Porsche Automobil 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.