Correlation Between Tesla and QUALCOMM Incorporated

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

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

Diversification Opportunities for Tesla and QUALCOMM Incorporated

-0.52

Correlation Coefficient

Tesla  QUALCOMM Incorporated

Excellent diversification

The 3 months correlation between Tesla and QUALCOMM is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and QUALCOMM Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QUALCOMM Incorporated and Tesla 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 Tesla Inc are associated (or correlated) with QUALCOMM Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QUALCOMM Incorporated has no effect on the direction of Tesla i.e., Tesla and QUALCOMM Incorporated go up and down completely randomly.

Pair Corralation between Tesla and QUALCOMM Incorporated

Assuming the 90 days trading horizon Tesla Inc is expected to generate 2.26 times more return on investment than QUALCOMM Incorporated. However, Tesla is 2.26 times more volatile than QUALCOMM Incorporated. It trades about 0.21 of its potential returns per unit of risk. QUALCOMM Incorporated is currently generating about -0.02 per unit of risk. If you would invest  490,108  in Tesla Inc on September 24, 2024 and sell it today you would earn a total of  364,525  from holding Tesla Inc or generate 74.38% return on investment over 90 days.

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

Tesla Inc  vs.  QUALCOMM Incorporated

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. In spite of fairly weak basic indicators, Tesla showed solid returns over the last few months and may actually be approaching a breakup point.

QUALCOMM Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days QUALCOMM Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, QUALCOMM Incorporated is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tesla and QUALCOMM Incorporated

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

The idea behind Tesla Inc and QUALCOMM Incorporated 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.