Correlation Between Tesla and North American
Can any of the company-specific risk be diversified away by investing in both Tesla and North American 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 North American 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 North American Financial, you can compare the effects of market volatilities on Tesla and North American 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and North American.
Diversification Opportunities for Tesla and North American
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Tesla and North is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc CDR and North American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Financial 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Financial has no effect on the direction of Tesla i.e., Tesla and North American go up and down completely randomly.
Pair Corralation between Tesla and North American
Assuming the 90 days trading horizon Tesla Inc CDR is expected to generate 21.34 times more return on investment than North American. However, Tesla is 21.34 times more volatile than North American Financial. It trades about 0.22 of its potential returns per unit of risk. North American Financial is currently generating about 0.52 per unit of risk. If you would invest 2,326 in Tesla Inc CDR on September 26, 2024 and sell it today you would earn a total of 1,876 from holding Tesla Inc CDR or generate 80.65% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Tesla Inc CDR vs. North American Financial
Performance |
Timeline |
Tesla Inc CDR |
North American Financial |
Tesla and North American Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Tesla and North American
The main advantage of trading using opposite Tesla and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, North American 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 North American will offset losses from the drop in North American's long position.Tesla vs. Canadian General Investments | Tesla vs. CNJ Capital Investments | Tesla vs. Canaf Investments | Tesla vs. Quorum Information Technologies |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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