Correlation Between IShares Trust and Tesla

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

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

Diversification Opportunities for IShares Trust and Tesla

-0.52

Correlation Coefficient

IShares Trust  Tesla

Excellent diversification

The 3 months correlation between IShares and Tesla is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc and IShares Trust 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 iShares Trust 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 IShares Trust i.e., IShares Trust and Tesla go up and down completely randomly.

Pair Corralation between IShares Trust and Tesla

Assuming the 90 days trading horizon iShares Trust is expected to generate 0.32 times more return on investment than Tesla. However, iShares Trust is 3.17 times less risky than Tesla. It trades about 0.06 of its potential returns per unit of risk. Tesla Inc is currently generating about -0.15 per unit of risk. If you would invest  177,707  in iShares Trust on December 29, 2024 and sell it today you would earn a total of  8,893  from holding iShares Trust or generate 5.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

iShares Trust   vs.  Tesla Inc

iShares Trust

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward-looking indicators, IShares Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly 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 IShares Trust and Tesla

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

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.