Correlation Between Tesla and Morguard

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

Diversification Opportunities for Tesla and Morguard

-0.64

Correlation Coefficient

Tesla  Morguard

Excellent diversification

The 3 months correlation between Tesla and Morguard is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc CDR and Morguard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morguard 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 Morguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morguard has no effect on the direction of Tesla i.e., Tesla and Morguard go up and down completely randomly.

Pair Corralation between Tesla and Morguard

Assuming the 90 days trading horizon Tesla Inc CDR is expected to generate 3.53 times more return on investment than Morguard. However, Tesla is 3.53 times more volatile than Morguard. It trades about 0.2 of its potential returns per unit of risk. Morguard is currently generating about -0.08 per unit of risk. If you would invest  2,204  in Tesla Inc CDR on October 6, 2024 and sell it today you would earn a total of  1,533  from holding Tesla Inc CDR or generate 69.56% return on investment over 90 days.

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

Tesla Inc CDR  vs.  Morguard

Tesla Inc CDR

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc CDR are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Tesla exhibited solid returns over the last few months and may actually be approaching a breakup point.

Morguard

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morguard has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Tesla and Morguard

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

The idea behind Tesla Inc CDR and Morguard 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.