Correlation Between Tesla and Eguana Technologies

Can any of the company-specific risk be diversified away by investing in both Tesla and Eguana Technologies 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 Eguana Technologies 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 Eguana Technologies, you can compare the effects of market volatilities on Tesla and Eguana Technologies 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 Eguana Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Eguana Technologies.

Diversification Opportunities for Tesla and Eguana Technologies

0.43

Correlation Coefficient

Tesla  Eguana Technologies

Very weak diversification

The 3 months correlation between Tesla and Eguana is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc CDR and Eguana Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eguana Technologies 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 Eguana Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eguana Technologies has no effect on the direction of Tesla i.e., Tesla and Eguana Technologies go up and down completely randomly.

Pair Corralation between Tesla and Eguana Technologies

Assuming the 90 days trading horizon Tesla Inc CDR is expected to generate 0.32 times more return on investment than Eguana Technologies. However, Tesla Inc CDR is 3.1 times less risky than Eguana Technologies. It trades about 0.23 of its potential returns per unit of risk. Eguana Technologies is currently generating about 0.06 per unit of risk. If you would invest  2,105  in Tesla Inc CDR on September 13, 2024 and sell it today you would earn a total of  1,765  from holding Tesla Inc CDR or generate 83.85% return on investment over 90 days.

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

Tesla Inc CDR  vs.  Eguana Technologies

Tesla Inc CDR

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc CDR are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Tesla exhibited solid returns over the last few months and may actually be approaching a breakup point.

Eguana Technologies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eguana Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Eguana Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tesla and Eguana Technologies

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

The idea behind Tesla Inc CDR and Eguana Technologies 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.