Correlation Between BHP and Tesla

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

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

Diversification Opportunities for BHP and Tesla

0.16

Correlation Coefficient

BHP  Tesla

Average diversification

The 3 months correlation between BHP and Tesla is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc and BHP 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 BHP 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 BHP i.e., BHP and Tesla go up and down completely randomly.

Pair Corralation between BHP and Tesla

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	Insignificant
Accuracy	97.62%
Values	Daily Returns

BHP Group  vs.  Tesla Inc

BHP Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BHP Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, BHP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tesla Inc

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with BHP and Tesla

The main advantage of trading using opposite BHP and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP 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 BHP Group 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 CEOs Directory module to screen CEOs from public companies around the world.