Correlation Between Tesla and Icon Energy

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

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

Diversification Opportunities for Tesla and Icon Energy

0.47

Correlation Coefficient

Tesla  Icon Energy

Very weak diversification

The 3 months correlation between Tesla and Icon is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Icon Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Energy Corp 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 Icon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Energy Corp has no effect on the direction of Tesla i.e., Tesla and Icon Energy go up and down completely randomly.

Pair Corralation between Tesla and Icon Energy

Given the investment horizon of 90 days Tesla Inc is expected to generate 0.47 times more return on investment than Icon Energy. However, Tesla Inc is 2.12 times less risky than Icon Energy. It trades about 0.34 of its potential returns per unit of risk. Icon Energy Corp is currently generating about 0.03 per unit of risk. If you would invest  34,203  in Tesla Inc on September 21, 2024 and sell it today you would earn a total of  9,414  from holding Tesla Inc or generate 27.52% return on investment over 90 days.

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

Tesla Inc  vs.  Icon Energy Corp

Tesla Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 16 (%) 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.

Icon Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Icon Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Icon Energy is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Tesla and Icon Energy

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

The idea behind Tesla Inc and Icon Energy Corp 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.