Correlation Between Tesla and Gen III

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

Diversification Opportunities for Tesla and Gen III

0.7

Correlation Coefficient

Tesla  Gen III

Poor diversification

The 3 months correlation between Tesla and Gen is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc CDR and Gen III Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gen III Oil 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 Gen III. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gen III Oil has no effect on the direction of Tesla i.e., Tesla and Gen III go up and down completely randomly.

Pair Corralation between Tesla and Gen III

Assuming the 90 days trading horizon Tesla Inc CDR is expected to under-perform the Gen III. But the stock apears to be less risky and, when comparing its historical volatility, Tesla Inc CDR is 1.7 times less risky than Gen III. The stock trades about -0.36 of its potential returns per unit of risk. The Gen III Oil is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  37.00  in Gen III Oil on December 5, 2024 and sell it today you would lose (8.00) from holding Gen III Oil or give up 21.62% of portfolio value over 90 days.

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

Tesla Inc CDR  vs.  Gen III Oil

Tesla Inc CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tesla Inc CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Gen III Oil

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gen III Oil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, Gen III is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Tesla and Gen III

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

The idea behind Tesla Inc CDR and Gen III Oil 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.