Correlation Between Tesla and MGP Ingredients

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

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

Diversification Opportunities for Tesla and MGP Ingredients

-0.78

Correlation Coefficient

Tesla  MGP Ingredients

Pay attention - limited upside

The 3 months correlation between Tesla and MGP is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and MGP Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGP Ingredients 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 MGP Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGP Ingredients has no effect on the direction of Tesla i.e., Tesla and MGP Ingredients go up and down completely randomly.

Pair Corralation between Tesla and MGP Ingredients

Given the investment horizon of 90 days Tesla Inc is expected to generate 1.46 times more return on investment than MGP Ingredients. However, Tesla is 1.46 times more volatile than MGP Ingredients. It trades about 0.08 of its potential returns per unit of risk. MGP Ingredients is currently generating about -0.06 per unit of risk. If you would invest  12,240  in Tesla Inc on October 4, 2024 and sell it today you would earn a total of  28,144  from holding Tesla Inc or generate 229.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.0%
Values	Daily Returns

Tesla Inc  vs.  MGP Ingredients

Tesla Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 12 (%) 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.

MGP Ingredients

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MGP Ingredients has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Tesla and MGP Ingredients

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

The idea behind Tesla Inc and MGP Ingredients 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.