Correlation Between IA Financial and Tesla

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

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

Diversification Opportunities for IA Financial and Tesla

0.85

Correlation Coefficient

IA Financial  Tesla

Very poor diversification

The 3 months correlation between IAG and Tesla is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding iA Financial 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 IA 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 iA Financial 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 IA Financial i.e., IA Financial and Tesla go up and down completely randomly.

Pair Corralation between IA Financial and Tesla

Assuming the 90 days trading horizon iA Financial is expected to generate 0.16 times more return on investment than Tesla. However, iA Financial is 6.19 times less risky than Tesla. It trades about -0.28 of its potential returns per unit of risk. Tesla Inc CDR is currently generating about -0.06 per unit of risk. If you would invest  13,606  in iA Financial on October 12, 2024 and sell it today you would lose (559.00) from holding iA Financial or give up 4.11% of portfolio value over 90 days.

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

iA Financial  vs.  Tesla Inc CDR

iA Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iA Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, IA Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Tesla Inc CDR

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc CDR are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Tesla exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IA Financial and Tesla

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

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.