Correlation Between First Republic and Tesla

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Can any of the company-specific risk be diversified away by investing in both First Republic 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 First Republic and Tesla into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Republic Bank and Tesla Inc, you can compare the effects of market volatilities on First Republic 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 First Republic with a short position of Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Republic and Tesla.

Diversification Opportunities for First Republic and Tesla

0.0
  Correlation Coefficient

Pay attention - limited upside

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

Pair Corralation between First Republic and Tesla

If you would invest  439,507  in Tesla Inc on September 18, 2024 and sell it today you would earn a total of  490,174  from holding Tesla Inc or generate 111.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

First Republic Bank  vs.  Tesla Inc

 Performance 
       Timeline  
First Republic Bank 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days First Republic Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, First Republic is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
Tesla Inc 

Risk-Adjusted Performance

21 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Tesla showed solid returns over the last few months and may actually be approaching a breakup point.

First Republic and Tesla Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with First Republic and Tesla

The main advantage of trading using opposite First Republic and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Republic 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 First Republic Bank 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.

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