Correlation Between Tesla and True North

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

Diversification Opportunities for Tesla and True North

-0.88

Correlation Coefficient

Tesla  True North

Pay attention - limited upside

The 3 months correlation between Tesla and True is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc CDR and True North Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on True North Commercial 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 True North. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of True North Commercial has no effect on the direction of Tesla i.e., Tesla and True North go up and down completely randomly.

Pair Corralation between Tesla and True North

Assuming the 90 days trading horizon Tesla Inc CDR is expected to generate 0.98 times more return on investment than True North. However, Tesla Inc CDR is 1.02 times less risky than True North. It trades about 0.08 of its potential returns per unit of risk. True North Commercial is currently generating about -0.04 per unit of risk. If you would invest  1,203  in Tesla Inc CDR on October 10, 2024 and sell it today you would earn a total of  2,393  from holding Tesla Inc CDR or generate 198.92% return on investment over 90 days.

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

Tesla Inc CDR  vs.  True North Commercial

Tesla Inc CDR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc CDR are ranked lower than 14 (%) 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.

True North Commercial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days True North Commercial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Tesla and True North

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

The idea behind Tesla Inc CDR and True North Commercial 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.