Correlation Between Tesla and GE Vernova

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

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

Diversification Opportunities for Tesla and GE Vernova

0.83

Correlation Coefficient

Tesla  GE Vernova

Very poor diversification

The 3 months correlation between Tesla and GEV is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and GE Vernova LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE Vernova LLC 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 GE Vernova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE Vernova LLC has no effect on the direction of Tesla i.e., Tesla and GE Vernova go up and down completely randomly.

Pair Corralation between Tesla and GE Vernova

Given the investment horizon of 90 days Tesla Inc is expected to generate 1.78 times more return on investment than GE Vernova. However, Tesla is 1.78 times more volatile than GE Vernova LLC. It trades about 0.24 of its potential returns per unit of risk. GE Vernova LLC is currently generating about 0.22 per unit of risk. If you would invest  22,787  in Tesla Inc on September 17, 2024 and sell it today you would earn a total of  20,836  from holding Tesla Inc or generate 91.44% return on investment over 90 days.

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

Tesla Inc  vs.  GE Vernova LLC

Tesla Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 19 (%) 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.

GE Vernova LLC

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GE Vernova LLC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, GE Vernova showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tesla and GE Vernova

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

The idea behind Tesla Inc and GE Vernova LLC 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.