Correlation Between Tesla and Western Energy

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

Diversification Opportunities for Tesla and Western Energy

0.79

Correlation Coefficient

Tesla  Western Energy

Poor diversification

The 3 months correlation between Tesla and Western is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc CDR and Western Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Energy Services 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 Western Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Energy Services has no effect on the direction of Tesla i.e., Tesla and Western Energy go up and down completely randomly.

Pair Corralation between Tesla and Western Energy

Assuming the 90 days trading horizon Tesla Inc CDR is expected to under-perform the Western Energy. In addition to that, Tesla is 1.11 times more volatile than Western Energy Services. It trades about -0.18 of its total potential returns per unit of risk. Western Energy Services is currently generating about -0.04 per unit of volatility. If you would invest  255.00  in Western Energy Services on December 22, 2024 and sell it today you would lose (36.00) from holding Western Energy Services or give up 14.12% 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.  Western Energy Services

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 abnormal 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.

Western Energy Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Western Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and 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 Western Energy

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

The idea behind Tesla Inc CDR and Western Energy Services 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.