Correlation Between American International and Tesla
Can any of the company-specific risk be diversified away by investing in both American International and Tesla 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 American International and Tesla into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American International Group and Tesla Inc, you can compare the effects of market volatilities on American International and Tesla 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 American International with a short position of Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of American International and Tesla.
Diversification Opportunities for American International and Tesla
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Tesla is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding American International Group and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc and American International 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 American International Group are associated (or correlated) with Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc has no effect on the direction of American International i.e., American International and Tesla go up and down completely randomly.
Pair Corralation between American International and Tesla
Assuming the 90 days trading horizon American International is expected to generate 12.87 times less return on investment than Tesla. But when comparing it to its historical volatility, American International Group is 4.08 times less risky than Tesla. It trades about 0.11 of its potential returns per unit of risk. Tesla Inc is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 424,441 in Tesla Inc on September 23, 2024 and sell it today you would earn a total of 430,192 from holding Tesla Inc or generate 101.35% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 97.62% |
Values | Daily Returns |
American International Group vs. Tesla Inc
Performance |
Timeline |
American International |
Tesla Inc |
American International and Tesla Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American International and Tesla
The main advantage of trading using opposite American International and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American International position performs unexpectedly, Tesla 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 Tesla will offset losses from the drop in Tesla's long position.American International vs. Berkshire Hathaway | American International vs. The Walt Disney | American International vs. Grupo Gigante S | American International vs. Genomma Lab Internacional |
Tesla vs. KB Home | Tesla vs. Grupo Sports World | Tesla vs. UnitedHealth Group Incorporated | Tesla vs. Ameriprise Financial |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
Other Complementary Tools
CEOs Directory Screen CEOs from public companies around the world | |
AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals |