Correlation Between Patria Investments and Tesla

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

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

Diversification Opportunities for Patria Investments and Tesla

0.86

Correlation Coefficient

Patria Investments  Tesla

Very poor diversification

The 3 months correlation between Patria and Tesla is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Patria Investments Limited and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc and Patria Investments 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 Patria Investments Limited 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 Patria Investments i.e., Patria Investments and Tesla go up and down completely randomly.

Pair Corralation between Patria Investments and Tesla

Assuming the 90 days trading horizon Patria Investments is expected to generate 13.34 times less return on investment than Tesla. But when comparing it to its historical volatility, Patria Investments Limited is 3.17 times less risky than Tesla. It trades about 0.07 of its potential returns per unit of risk. Tesla Inc is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  3,882  in Tesla Inc on October 22, 2024 and sell it today you would earn a total of  4,328  from holding Tesla Inc or generate 111.49% return on investment over 90 days.

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

Patria Investments Limited  vs.  Tesla Inc

Patria Investments

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Patria Investments Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Patria Investments may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Tesla Inc

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Tesla sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Patria Investments and Tesla

The main advantage of trading using opposite Patria Investments and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Patria Investments 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 Patria Investments Limited 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.