Correlation Between Financial and Tesla

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

By analyzing existing cross correlation between Financial 15 Split and Tesla Inc CDR, you can compare the effects of market volatilities on Financial 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 Financial with a short position of Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and Tesla.

Diversification Opportunities for Financial and Tesla

0.84

Correlation Coefficient

Financial  Tesla

Very poor diversification

The 3 months correlation between Financial and Tesla is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and Tesla Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc CDR and Financial 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 Financial 15 Split 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 CDR has no effect on the direction of Financial i.e., Financial and Tesla go up and down completely randomly.

Pair Corralation between Financial and Tesla

Assuming the 90 days trading horizon Financial is expected to generate 10.19 times less return on investment than Tesla. But when comparing it to its historical volatility, Financial 15 Split is 17.57 times less risky than Tesla. It trades about 0.33 of its potential returns per unit of risk. Tesla Inc CDR is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,319  in Tesla Inc CDR on September 24, 2024 and sell it today you would earn a total of  1,518  from holding Tesla Inc CDR or generate 65.46% return on investment over 90 days.

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

Financial 15 Split  vs.  Tesla Inc CDR

Financial 15 Split

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Financial 15 Split are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Tesla Inc CDR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc CDR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Tesla exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Financial and Tesla

The main advantage of trading using opposite Financial and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial 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 Financial 15 Split and Tesla Inc CDR 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.