Correlation Between Canoo and Tesla

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

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

Diversification Opportunities for Canoo and Tesla

0.84

Correlation Coefficient

Canoo  Tesla

Very poor diversification

The 3 months correlation between Canoo and Tesla is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Canoo Inc and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc and Canoo 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 Canoo 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 Canoo i.e., Canoo and Tesla go up and down completely randomly.

Pair Corralation between Canoo and Tesla

Given the investment horizon of 90 days Canoo Inc is expected to under-perform the Tesla. In addition to that, Canoo is 5.4 times more volatile than Tesla Inc. It trades about -0.19 of its total potential returns per unit of risk. Tesla Inc is currently generating about -0.13 per unit of volatility. If you would invest  41,741  in Tesla Inc on December 28, 2024 and sell it today you would lose (14,428) from holding Tesla Inc or give up 34.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	38.33%
Values	Daily Returns

Canoo Inc  vs.  Tesla Inc

Canoo Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canoo Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Tesla Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tesla Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Canoo and Tesla

The main advantage of trading using opposite Canoo and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canoo 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 Canoo 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.