Correlation Between Xpeng and Polestar Automotive

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

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

Diversification Opportunities for Xpeng and Polestar Automotive

-0.47

Correlation Coefficient

Xpeng  Polestar Automotive

Very good diversification

The 3 months correlation between Xpeng and Polestar is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Xpeng Inc and Polestar Automotive Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polestar Automotive and Xpeng 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 Xpeng Inc 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 Xpeng i.e., Xpeng and Polestar Automotive go up and down completely randomly.

Pair Corralation between Xpeng and Polestar Automotive

Given the investment horizon of 90 days Xpeng Inc is expected to generate 1.01 times more return on investment than Polestar Automotive. However, Xpeng is 1.01 times more volatile than Polestar Automotive Holding. It trades about -0.05 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  1,367  in Xpeng Inc on September 13, 2024 and sell it today you would lose (80.50) from holding Xpeng Inc or give up 5.89% of portfolio value over 90 days.

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

Xpeng Inc  vs.  Polestar Automotive Holding

Xpeng Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xpeng Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Xpeng showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Xpeng and Polestar Automotive

The main advantage of trading using opposite Xpeng and Polestar Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xpeng 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 Xpeng Inc 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.