Correlation Between Electric Car and Tesla

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

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

Diversification Opportunities for Electric Car and Tesla

0.0

Correlation Coefficient

Electric Car  Tesla

Pay attention - limited upside

The 3 months correlation between Electric and Tesla is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Electric Car and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc and Electric Car 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 Electric Car 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 Electric Car i.e., Electric Car and Tesla go up and down completely randomly.

Pair Corralation between Electric Car and Tesla

Given the investment horizon of 90 days Electric Car is expected to generate 27.16 times more return on investment than Tesla. However, Electric Car is 27.16 times more volatile than Tesla Inc. It trades about 0.13 of its potential returns per unit of risk. Tesla Inc is currently generating about 0.23 per unit of risk. If you would invest  0.01  in Electric Car on September 12, 2024 and sell it today you would earn a total of  1,609  from holding Electric Car or generate 1.60899E7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Electric Car  vs.  Tesla Inc

Electric Car

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Electric Car are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental indicators, Electric Car reported solid returns over the last few months and may actually be approaching a breakup point.

Tesla Inc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 18 (%) 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 Electric Car and Tesla

The main advantage of trading using opposite Electric Car and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electric Car 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 Electric Car 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.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.