Correlation Between Tesla and BHP

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

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

Diversification Opportunities for Tesla and BHP

0.85

Correlation Coefficient

Tesla  BHP

Very poor diversification

The 3 months correlation between Tesla and BHP is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and BHP Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group 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 BHP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHP Group has no effect on the direction of Tesla i.e., Tesla and BHP go up and down completely randomly.

Pair Corralation between Tesla and BHP

Assuming the 90 days trading horizon Tesla Inc is expected to under-perform the BHP. In addition to that, Tesla is 3.43 times more volatile than BHP Group. It trades about -0.15 of its total potential returns per unit of risk. BHP Group is currently generating about -0.1 per unit of volatility. If you would invest  111,673  in BHP Group on December 26, 2024 and sell it today you would lose (8,930) from holding BHP Group or give up 8.0% of portfolio value over 90 days.

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

Tesla Inc  vs.  BHP Group

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.

BHP Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days BHP Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Tesla and BHP

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

The idea behind Tesla Inc and BHP Group 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.