Correlation Between Tesla and Brookfield Investments

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

By analyzing existing cross correlation between Tesla Inc CDR and Brookfield Investments, you can compare the effects of market volatilities on Tesla and Brookfield Investments 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 Brookfield Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Brookfield Investments.

Diversification Opportunities for Tesla and Brookfield Investments

0.42

Correlation Coefficient

Tesla  Brookfield Investments

Very weak diversification

The 3 months correlation between Tesla and Brookfield is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc CDR and Brookfield Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Investments 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 CDR are associated (or correlated) with Brookfield Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Investments has no effect on the direction of Tesla i.e., Tesla and Brookfield Investments go up and down completely randomly.

Pair Corralation between Tesla and Brookfield Investments

Assuming the 90 days trading horizon Tesla Inc CDR is expected to generate 10.13 times more return on investment than Brookfield Investments. However, Tesla is 10.13 times more volatile than Brookfield Investments. It trades about 0.18 of its potential returns per unit of risk. Brookfield Investments is currently generating about 0.05 per unit of risk. If you would invest  2,011  in Tesla Inc CDR on September 4, 2024 and sell it today you would earn a total of  1,240  from holding Tesla Inc CDR or generate 61.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	53.13%
Values	Daily Returns

Tesla Inc CDR  vs.  Brookfield Investments

Tesla Inc CDR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc CDR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Tesla exhibited solid returns over the last few months and may actually be approaching a breakup point.

Brookfield Investments

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Investments are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Brookfield Investments is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tesla and Brookfield Investments

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

The idea behind Tesla Inc CDR and Brookfield Investments 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.