Correlation Between Tesla and Nissan Chemical

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

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

Diversification Opportunities for Tesla and Nissan Chemical

-0.66

Correlation Coefficient

Tesla  Nissan Chemical

Excellent diversification

The 3 months correlation between Tesla and Nissan is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Nissan Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nissan Chemical Indu 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 Nissan Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nissan Chemical Indu has no effect on the direction of Tesla i.e., Tesla and Nissan Chemical go up and down completely randomly.

Pair Corralation between Tesla and Nissan Chemical

Given the investment horizon of 90 days Tesla Inc is expected to generate 0.65 times more return on investment than Nissan Chemical. However, Tesla Inc is 1.54 times less risky than Nissan Chemical. It trades about 0.16 of its potential returns per unit of risk. Nissan Chemical Industries is currently generating about -0.03 per unit of risk. If you would invest  35,793  in Tesla Inc on October 5, 2024 and sell it today you would earn a total of  4,591  from holding Tesla Inc or generate 12.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Tesla Inc  vs.  Nissan Chemical Industries

Tesla Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 15 (%) 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.

Nissan Chemical Indu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nissan Chemical Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Nissan Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tesla and Nissan Chemical

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

The idea behind Tesla Inc and Nissan Chemical Industries 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.