Correlation Between Polestar Automotive and Tesla

Can any of the company-specific risk be diversified away by investing in both Polestar Automotive and Tesla 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 Tesla 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 Tesla Inc, you can compare the effects of market volatilities on Polestar Automotive and Tesla 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 Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polestar Automotive and Tesla.

Diversification Opportunities for Polestar Automotive and Tesla

-0.65

Correlation Coefficient

Polestar Automotive  Tesla

Excellent diversification

The 3 months correlation between Polestar and Tesla is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Polestar Automotive Holding and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc 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 Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc has no effect on the direction of Polestar Automotive i.e., Polestar Automotive and Tesla go up and down completely randomly.

Pair Corralation between Polestar Automotive and Tesla

Given the investment horizon of 90 days Polestar Automotive Holding is expected to under-perform the Tesla. In addition to that, Polestar Automotive is 1.1 times more volatile than Tesla Inc. It trades about -0.09 of its total potential returns per unit of risk. Tesla Inc is currently generating about 0.21 per unit of volatility. If you would invest  22,981  in Tesla Inc on September 12, 2024 and sell it today you would earn a total of  17,118  from holding Tesla Inc or generate 74.49% return on investment over 90 days.

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

Polestar Automotive Holding  vs.  Tesla Inc

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 unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Tesla Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal essential indicators, Tesla sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Polestar Automotive and Tesla

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

The idea behind Polestar Automotive Holding and Tesla Inc 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.