Correlation Between Tesla and Novo Resources

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

Diversification Opportunities for Tesla and Novo Resources

-0.57

Correlation Coefficient

Tesla  Novo Resources

Excellent diversification

The 3 months correlation between Tesla and Novo is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc CDR and Novo Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novo Resources Corp 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 Novo Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novo Resources Corp has no effect on the direction of Tesla i.e., Tesla and Novo Resources go up and down completely randomly.

Pair Corralation between Tesla and Novo Resources

Assuming the 90 days trading horizon Tesla Inc CDR is expected to generate 0.95 times more return on investment than Novo Resources. However, Tesla Inc CDR is 1.05 times less risky than Novo Resources. It trades about 0.2 of its potential returns per unit of risk. Novo Resources Corp is currently generating about 0.03 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	Very Weak
Accuracy	98.39%
Values	Daily Returns

Tesla Inc CDR  vs.  Novo Resources Corp

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 unfluctuating technical and fundamental indicators, Tesla exhibited solid returns over the last few months and may actually be approaching a breakup point.

Novo Resources Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Novo Resources Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Novo Resources may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Tesla and Novo Resources

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

The idea behind Tesla Inc CDR and Novo Resources Corp 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.