Correlation Between Tesla and Veltex

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

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

Diversification Opportunities for Tesla and Veltex

-0.42

Correlation Coefficient

Tesla  Veltex

Very good diversification

The 3 months correlation between Tesla and Veltex is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Veltex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veltex 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 Veltex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veltex has no effect on the direction of Tesla i.e., Tesla and Veltex go up and down completely randomly.

Pair Corralation between Tesla and Veltex

Given the investment horizon of 90 days Tesla is expected to generate 1.27 times less return on investment than Veltex. But when comparing it to its historical volatility, Tesla Inc is 3.42 times less risky than Veltex. It trades about 0.07 of its potential returns per unit of risk. Veltex is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  24.00  in Veltex on September 23, 2024 and sell it today you would lose (15.63) from holding Veltex or give up 65.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	78.52%
Values	Daily Returns

Tesla Inc  vs.  Veltex

Tesla Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating essential indicators, Tesla sustained solid returns over the last few months and may actually be approaching a breakup point.

Veltex

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Veltex are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Veltex exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tesla and Veltex

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

The idea behind Tesla Inc and Veltex 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.