Correlation Between Tesla and Yellow Pages

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

Diversification Opportunities for Tesla and Yellow Pages

0.9

Correlation Coefficient

Tesla  Yellow Pages

Almost no diversification

The 3 months correlation between Tesla and Yellow is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc CDR and Yellow Pages Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yellow Pages Limited 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 Yellow Pages. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yellow Pages Limited has no effect on the direction of Tesla i.e., Tesla and Yellow Pages go up and down completely randomly.

Pair Corralation between Tesla and Yellow Pages

Assuming the 90 days trading horizon Tesla Inc CDR is expected to generate 2.06 times more return on investment than Yellow Pages. However, Tesla is 2.06 times more volatile than Yellow Pages Limited. It trades about 0.29 of its potential returns per unit of risk. Yellow Pages Limited is currently generating about 0.04 per unit of risk. If you would invest  3,099  in Tesla Inc CDR on September 22, 2024 and sell it today you would earn a total of  738.00  from holding Tesla Inc CDR or generate 23.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Tesla Inc CDR  vs.  Yellow Pages Limited

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.

Yellow Pages Limited

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yellow Pages Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Yellow Pages displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tesla and Yellow Pages

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

The idea behind Tesla Inc CDR and Yellow Pages Limited 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 Global Correlations module to find global opportunities by holding instruments from different markets.