Correlation Between Tesla and Balfour Beatty

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

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

Diversification Opportunities for Tesla and Balfour Beatty

-0.5

Correlation Coefficient

Tesla  Balfour Beatty

Very good diversification

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

Pair Corralation between Tesla and Balfour Beatty

Given the investment horizon of 90 days Tesla Inc is expected to generate 0.62 times more return on investment than Balfour Beatty. However, Tesla Inc is 1.62 times less risky than Balfour Beatty. It trades about 0.54 of its potential returns per unit of risk. Balfour Beatty plc is currently generating about -0.05 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 Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Tesla Inc  vs.  Balfour Beatty plc

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.

Balfour Beatty plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Balfour Beatty plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Balfour Beatty is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Tesla and Balfour Beatty

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

The idea behind Tesla Inc and Balfour Beatty plc 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.