Correlation Between Tesla and Caribbean Utilities

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

Diversification Opportunities for Tesla and Caribbean Utilities

-0.39

Correlation Coefficient

Tesla  Caribbean Utilities

Very good diversification

The 3 months correlation between Tesla and Caribbean is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc CDR and Caribbean Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caribbean Utilities 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 Caribbean Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caribbean Utilities has no effect on the direction of Tesla i.e., Tesla and Caribbean Utilities go up and down completely randomly.

Pair Corralation between Tesla and Caribbean Utilities

Assuming the 90 days trading horizon Tesla Inc CDR is expected to generate 3.9 times more return on investment than Caribbean Utilities. However, Tesla is 3.9 times more volatile than Caribbean Utilities. It trades about 0.22 of its potential returns per unit of risk. Caribbean Utilities is currently generating about 0.02 per unit of risk. If you would invest  2,098  in Tesla Inc CDR on September 12, 2024 and sell it today you would earn a total of  1,560  from holding Tesla Inc CDR or generate 74.36% return on investment over 90 days.

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

Tesla Inc CDR  vs.  Caribbean Utilities

Tesla Inc CDR

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc CDR are ranked lower than 17 (%) 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.

Caribbean Utilities

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Caribbean Utilities are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Caribbean Utilities is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Tesla and Caribbean Utilities

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

The idea behind Tesla Inc CDR and Caribbean Utilities 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 Valuation module to check real value of public entities based on technical and fundamental data.