Correlation Between Palantir Technologies and Tesla

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

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

Diversification Opportunities for Palantir Technologies and Tesla

0.94

Correlation Coefficient

Palantir Technologies  Tesla

Almost no diversification

The 3 months correlation between Palantir and Tesla is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Palantir Technologies and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc and Palantir Technologies 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 Palantir Technologies 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 Palantir Technologies i.e., Palantir Technologies and Tesla go up and down completely randomly.

Pair Corralation between Palantir Technologies and Tesla

Assuming the 90 days horizon Palantir Technologies is expected to generate 0.98 times more return on investment than Tesla. However, Palantir Technologies is 1.02 times less risky than Tesla. It trades about 0.29 of its potential returns per unit of risk. Tesla Inc is currently generating about 0.2 per unit of risk. If you would invest  2,879  in Palantir Technologies on September 2, 2024 and sell it today you would earn a total of  3,455  from holding Palantir Technologies or generate 120.01% return on investment over 90 days.

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

Palantir Technologies  vs.  Tesla Inc

Palantir Technologies

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Palantir Technologies are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Palantir Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Tesla Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tesla reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Palantir Technologies and Tesla

The main advantage of trading using opposite Palantir Technologies and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palantir Technologies 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 Palantir Technologies 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.