Correlation Between Tesla and Ford

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

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

Diversification Opportunities for Tesla and Ford

0.2

Correlation Coefficient

Tesla  Ford

Modest diversification

The 3 months correlation between Tesla and Ford is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor 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 Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Tesla i.e., Tesla and Ford go up and down completely randomly.

Pair Corralation between Tesla and Ford

Assuming the 90 days trading horizon Tesla Inc is expected to under-perform the Ford. In addition to that, Tesla is 1.8 times more volatile than Ford Motor. It trades about -0.15 of its total potential returns per unit of risk. Ford Motor is currently generating about 0.04 per unit of volatility. If you would invest  19,959  in Ford Motor on December 27, 2024 and sell it today you would earn a total of  741.00  from holding Ford Motor or generate 3.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Tesla Inc  vs.  Ford Motor

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.

Ford Motor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary indicators, Ford is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tesla and Ford

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

The idea behind Tesla Inc and Ford Motor 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.