Correlation Between Tesla and Cooper Companies

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

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

Diversification Opportunities for Tesla and Cooper Companies

-0.48

Correlation Coefficient

Tesla  Cooper Companies

Very good diversification

The 3 months correlation between Tesla and Cooper is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and The Cooper Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cooper Companies 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 Cooper Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cooper Companies has no effect on the direction of Tesla i.e., Tesla and Cooper Companies go up and down completely randomly.

Pair Corralation between Tesla and Cooper Companies

Assuming the 90 days trading horizon Tesla Inc is expected to generate 1.99 times more return on investment than Cooper Companies. However, Tesla is 1.99 times more volatile than The Cooper Companies. It trades about -0.04 of its potential returns per unit of risk. The Cooper Companies is currently generating about -0.24 per unit of risk. If you would invest  850,083  in Tesla Inc on October 12, 2024 and sell it today you would lose (43,083) from holding Tesla Inc or give up 5.07% of portfolio value over 90 days.

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

Tesla Inc  vs.  The Cooper Companies

Tesla Inc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 18 (%) 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.

Cooper Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Cooper Companies 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 Cooper Companies

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

The idea behind Tesla Inc and The Cooper Companies 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.