Correlation Between Tesla and ResMed

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

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

Diversification Opportunities for Tesla and ResMed

0.49

Correlation Coefficient

Tesla  ResMed

Very weak diversification

The 3 months correlation between Tesla and ResMed is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and ResMed Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ResMed Inc and Tesla 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 Tesla Inc are associated (or correlated) with ResMed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ResMed Inc has no effect on the direction of Tesla i.e., Tesla and ResMed go up and down completely randomly.

Pair Corralation between Tesla and ResMed

Assuming the 90 days trading horizon Tesla Inc is expected to generate 2.64 times more return on investment than ResMed. However, Tesla is 2.64 times more volatile than ResMed Inc. It trades about 0.26 of its potential returns per unit of risk. ResMed Inc is currently generating about 0.06 per unit of risk. If you would invest  20,120  in Tesla Inc on October 12, 2024 and sell it today you would earn a total of  17,855  from holding Tesla Inc or generate 88.74% return on investment over 90 days.

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

Tesla Inc  vs.  ResMed Inc

Tesla Inc

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Tesla unveiled solid returns over the last few months and may actually be approaching a breakup point.

ResMed Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ResMed Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ResMed may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Tesla and ResMed

The main advantage of trading using opposite Tesla and ResMed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, ResMed 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 ResMed will offset losses from the drop in ResMed's long position.

The idea behind Tesla Inc and ResMed 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.