Correlation Between Tesla and Ares Acquisition

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

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

Diversification Opportunities for Tesla and Ares Acquisition

-0.01

Correlation Coefficient

Tesla  Ares Acquisition

Good diversification

The 3 months correlation between Tesla and Ares is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Ares Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Acquisition 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 Ares Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Acquisition has no effect on the direction of Tesla i.e., Tesla and Ares Acquisition go up and down completely randomly.

Pair Corralation between Tesla and Ares Acquisition

Given the investment horizon of 90 days Tesla Inc is expected to generate 9.63 times more return on investment than Ares Acquisition. However, Tesla is 9.63 times more volatile than Ares Acquisition. It trades about 0.23 of its potential returns per unit of risk. Ares Acquisition is currently generating about 0.05 per unit of risk. If you would invest  23,825  in Tesla Inc on September 20, 2024 and sell it today you would earn a total of  20,188  from holding Tesla Inc or generate 84.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Tesla Inc  vs.  Ares Acquisition

Tesla Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal essential indicators, Tesla sustained solid returns over the last few months and may actually be approaching a breakup point.

Ares Acquisition

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Acquisition are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Ares Acquisition is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Tesla and Ares Acquisition

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

The idea behind Tesla Inc and Ares Acquisition 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.