Correlation Between Tesla and Antero Midstream

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

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

Diversification Opportunities for Tesla and Antero Midstream

0.5

Correlation Coefficient

Tesla  Antero Midstream

Very weak diversification

The 3 months correlation between Tesla and Antero is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Antero Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Antero Midstream Partners 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 Antero Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Antero Midstream Partners has no effect on the direction of Tesla i.e., Tesla and Antero Midstream go up and down completely randomly.

Pair Corralation between Tesla and Antero Midstream

Given the investment horizon of 90 days Tesla Inc is expected to generate 2.1 times more return on investment than Antero Midstream. However, Tesla is 2.1 times more volatile than Antero Midstream Partners. It trades about 0.54 of its potential returns per unit of risk. Antero Midstream Partners is currently generating about -0.12 per unit of risk. If you would invest  33,874  in Tesla Inc on September 17, 2024 and sell it today you would earn a total of  12,428  from holding Tesla Inc or generate 36.69% return on investment over 90 days.

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

Tesla Inc  vs.  Antero Midstream Partners

Tesla Inc

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 20 (%) 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.

Antero Midstream Partners

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Antero Midstream Partners are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Antero Midstream is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Tesla and Antero Midstream

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

The idea behind Tesla Inc and Antero Midstream Partners 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.