Correlation Between Tesla and CMR SAB

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

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

Diversification Opportunities for Tesla and CMR SAB

0.11

Correlation Coefficient

Tesla  CMR SAB

Average diversification

The 3 months correlation between Tesla and CMR is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and CMR SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMR SAB de 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 CMR SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMR SAB de has no effect on the direction of Tesla i.e., Tesla and CMR SAB go up and down completely randomly.

Pair Corralation between Tesla and CMR SAB

Assuming the 90 days trading horizon Tesla Inc is expected to generate 1.28 times more return on investment than CMR SAB. However, Tesla is 1.28 times more volatile than CMR SAB de. It trades about 0.1 of its potential returns per unit of risk. CMR SAB de is currently generating about -0.05 per unit of risk. If you would invest  209,614  in Tesla Inc on September 24, 2024 and sell it today you would earn a total of  645,019  from holding Tesla Inc or generate 307.72% return on investment over 90 days.

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

Tesla Inc  vs.  CMR SAB de

Tesla Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Tesla showed solid returns over the last few months and may actually be approaching a breakup point.

CMR SAB de

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CMR SAB de are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, CMR SAB showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tesla and CMR SAB

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

The idea behind Tesla Inc and CMR SAB de 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.