Correlation Between Tesla and BonTerra Resources

Can any of the company-specific risk be diversified away by investing in both Tesla and BonTerra Resources 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 BonTerra Resources 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 BonTerra Resources, you can compare the effects of market volatilities on Tesla and BonTerra Resources 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 BonTerra Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and BonTerra Resources.

Diversification Opportunities for Tesla and BonTerra Resources

-0.69

Correlation Coefficient

Tesla  BonTerra Resources

Excellent diversification

The 3 months correlation between Tesla and BonTerra is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc CDR and BonTerra Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BonTerra Resources 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 BonTerra Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BonTerra Resources has no effect on the direction of Tesla i.e., Tesla and BonTerra Resources go up and down completely randomly.

Pair Corralation between Tesla and BonTerra Resources

Assuming the 90 days trading horizon Tesla Inc CDR is expected to generate 1.29 times more return on investment than BonTerra Resources. However, Tesla is 1.29 times more volatile than BonTerra Resources. It trades about 0.16 of its potential returns per unit of risk. BonTerra Resources is currently generating about -0.07 per unit of risk. If you would invest  2,105  in Tesla Inc CDR on September 5, 2024 and sell it today you would earn a total of  1,099  from holding Tesla Inc CDR or generate 52.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Tesla Inc CDR  vs.  BonTerra Resources

Tesla Inc CDR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc CDR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Tesla exhibited solid returns over the last few months and may actually be approaching a breakup point.

BonTerra Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BonTerra Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Tesla and BonTerra Resources

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

The idea behind Tesla Inc CDR and BonTerra Resources 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.