Correlation Between Tesla and Swan Hedged

Can any of the company-specific risk be diversified away by investing in both Tesla and Swan Hedged 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 Swan Hedged into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tesla Inc and Swan Hedged Equity, you can compare the effects of market volatilities on Tesla and Swan Hedged 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 Swan Hedged. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Swan Hedged.

Diversification Opportunities for Tesla and Swan Hedged

0.74

Correlation Coefficient

Tesla  Swan Hedged

Poor diversification

The 3 months correlation between Tesla and Swan is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Swan Hedged Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swan Hedged Equity 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 are associated (or correlated) with Swan Hedged. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swan Hedged Equity has no effect on the direction of Tesla i.e., Tesla and Swan Hedged go up and down completely randomly.

Pair Corralation between Tesla and Swan Hedged

Given the investment horizon of 90 days Tesla Inc is expected to generate 7.68 times more return on investment than Swan Hedged. However, Tesla is 7.68 times more volatile than Swan Hedged Equity. It trades about 0.11 of its potential returns per unit of risk. Swan Hedged Equity is currently generating about 0.05 per unit of risk. If you would invest  25,294  in Tesla Inc on October 4, 2024 and sell it today you would earn a total of  15,090  from holding Tesla Inc or generate 59.66% return on investment over 90 days.

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

Tesla Inc  vs.  Swan Hedged Equity

Tesla Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal essential indicators, Tesla sustained solid returns over the last few months and may actually be approaching a breakup point.

Swan Hedged Equity

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Swan Hedged Equity are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Swan Hedged is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Tesla and Swan Hedged

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

The idea behind Tesla Inc and Swan Hedged Equity 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.