Correlation Between Tesla and Zephyr Minerals

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

Diversification Opportunities for Tesla and Zephyr Minerals

-0.05

Correlation Coefficient

Tesla  Zephyr Minerals

Good diversification

The 3 months correlation between Tesla and Zephyr is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc CDR and Zephyr Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zephyr Minerals 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 Zephyr Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zephyr Minerals has no effect on the direction of Tesla i.e., Tesla and Zephyr Minerals go up and down completely randomly.

Pair Corralation between Tesla and Zephyr Minerals

Assuming the 90 days trading horizon Tesla Inc CDR is expected to generate 0.46 times more return on investment than Zephyr Minerals. However, Tesla Inc CDR is 2.17 times less risky than Zephyr Minerals. It trades about 0.05 of its potential returns per unit of risk. Zephyr Minerals is currently generating about 0.01 per unit of risk. If you would invest  2,450  in Tesla Inc CDR on October 22, 2024 and sell it today you would earn a total of  1,431  from holding Tesla Inc CDR or generate 58.41% return on investment over 90 days.

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

Tesla Inc CDR  vs.  Zephyr Minerals

Tesla Inc CDR

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc CDR are ranked lower than 18 (%) 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.

Zephyr Minerals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zephyr Minerals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Zephyr Minerals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tesla and Zephyr Minerals

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

The idea behind Tesla Inc CDR and Zephyr Minerals 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.