Correlation Between Tesla and BCE

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

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

Diversification Opportunities for Tesla and BCE

0.22

Correlation Coefficient

Tesla  BCE

Modest diversification

The 3 months correlation between Tesla and BCE is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc CDR and BCE Inc Pref in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCE Inc Pref 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 CDR are associated (or correlated) with BCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCE Inc Pref has no effect on the direction of Tesla i.e., Tesla and BCE go up and down completely randomly.

Pair Corralation between Tesla and BCE

Assuming the 90 days trading horizon Tesla Inc CDR is expected to under-perform the BCE. In addition to that, Tesla is 5.95 times more volatile than BCE Inc Pref. It trades about 0.0 of its total potential returns per unit of risk. BCE Inc Pref is currently generating about 0.49 per unit of volatility. If you would invest  1,615  in BCE Inc Pref on October 24, 2024 and sell it today you would earn a total of  110.00  from holding BCE Inc Pref or generate 6.81% return on investment over 90 days.

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

Tesla Inc CDR  vs.  BCE Inc Pref

Tesla Inc CDR

Risk-Adjusted Performance

16 of 100

Solid

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

BCE Inc Pref

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BCE Inc Pref are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, BCE 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 BCE

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

The idea behind Tesla Inc CDR and BCE Inc Pref 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.