Correlation Between Arq and Tesla

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

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

Diversification Opportunities for Arq and Tesla

0.75

Correlation Coefficient

Arq  Tesla

Poor diversification

The 3 months correlation between Arq and Tesla is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Arq Inc and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc and Arq 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 Arq Inc 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 Arq i.e., Arq and Tesla go up and down completely randomly.

Pair Corralation between Arq and Tesla

Considering the 90-day investment horizon Arq Inc is expected to under-perform the Tesla. But the stock apears to be less risky and, when comparing its historical volatility, Arq Inc is 1.15 times less risky than Tesla. The stock trades about -0.2 of its potential returns per unit of risk. The Tesla Inc is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  42,477  in Tesla Inc on October 12, 2024 and sell it today you would lose (2,983) from holding Tesla Inc or give up 7.02% of portfolio value over 90 days.

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

Arq Inc  vs.  Tesla Inc

Arq Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arq Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Arq reported solid returns over the last few months and may actually be approaching a breakup point.

Tesla Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 17 (%) 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.

Pair Trading with Arq and Tesla

The main advantage of trading using opposite Arq and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arq 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.

The idea behind Arq Inc and Tesla Inc 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.