Correlation Between Sphere Entertainment and Tesla

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

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

Diversification Opportunities for Sphere Entertainment and Tesla

-0.48

Correlation Coefficient

Sphere Entertainment  Tesla

Very good diversification

The 3 months correlation between Sphere and Tesla is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Sphere Entertainment Co and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc and Sphere Entertainment 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 Sphere Entertainment Co 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 Sphere Entertainment i.e., Sphere Entertainment and Tesla go up and down completely randomly.

Pair Corralation between Sphere Entertainment and Tesla

Given the investment horizon of 90 days Sphere Entertainment Co is expected to generate 0.62 times more return on investment than Tesla. However, Sphere Entertainment Co is 1.61 times less risky than Tesla. It trades about 0.05 of its potential returns per unit of risk. Tesla Inc is currently generating about -0.07 per unit of risk. If you would invest  4,105  in Sphere Entertainment Co on December 1, 2024 and sell it today you would earn a total of  258.00  from holding Sphere Entertainment Co or generate 6.29% return on investment over 90 days.

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

Sphere Entertainment Co  vs.  Tesla Inc

Sphere Entertainment

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sphere Entertainment Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical indicators, Sphere Entertainment may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 Sphere Entertainment and Tesla

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