Correlation Between Porto Seguro and Tesla

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

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

Diversification Opportunities for Porto Seguro and Tesla

0.64

Correlation Coefficient

Porto Seguro  Tesla

Poor diversification

The 3 months correlation between Porto and Tesla is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Porto Seguro SA and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc and Porto Seguro 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 Porto Seguro SA 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 Porto Seguro i.e., Porto Seguro and Tesla go up and down completely randomly.

Pair Corralation between Porto Seguro and Tesla

Assuming the 90 days trading horizon Porto Seguro is expected to generate 11.06 times less return on investment than Tesla. But when comparing it to its historical volatility, Porto Seguro SA is 3.79 times less risky than Tesla. It trades about 0.08 of its potential returns per unit of risk. Tesla Inc is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  4,316  in Tesla Inc on September 23, 2024 and sell it today you would earn a total of  3,743  from holding Tesla Inc or generate 86.72% return on investment over 90 days.

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

Porto Seguro SA  vs.  Tesla Inc

Porto Seguro SA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Porto Seguro SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Porto Seguro is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Tesla Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Tesla sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Porto Seguro and Tesla

The main advantage of trading using opposite Porto Seguro and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Porto Seguro 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 Porto Seguro SA 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.