Correlation Between Tesla and Supremex

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

Diversification Opportunities for Tesla and Supremex

-0.66

Correlation Coefficient

Tesla  Supremex

Excellent diversification

The 3 months correlation between Tesla and Supremex is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc CDR and Supremex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Supremex 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 Supremex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Supremex has no effect on the direction of Tesla i.e., Tesla and Supremex go up and down completely randomly.

Pair Corralation between Tesla and Supremex

Assuming the 90 days trading horizon Tesla Inc CDR is expected to generate 4.01 times more return on investment than Supremex. However, Tesla is 4.01 times more volatile than Supremex. It trades about 0.17 of its potential returns per unit of risk. Supremex is currently generating about -0.19 per unit of risk. If you would invest  3,258  in Tesla Inc CDR on October 5, 2024 and sell it today you would earn a total of  479.00  from holding Tesla Inc CDR or generate 14.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Tesla Inc CDR  vs.  Supremex

Tesla Inc CDR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc CDR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Tesla exhibited solid returns over the last few months and may actually be approaching a breakup point.

Supremex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Supremex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic 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 Supremex

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

The idea behind Tesla Inc CDR and Supremex 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.