Correlation Between Tesla and RS Public

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

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

Diversification Opportunities for Tesla and RS Public

-0.81

Correlation Coefficient

Tesla  RS Public

Pay attention - limited upside

The 3 months correlation between Tesla and RS Public is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and RS Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RS Public 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 RS Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RS Public has no effect on the direction of Tesla i.e., Tesla and RS Public go up and down completely randomly.

Pair Corralation between Tesla and RS Public

Given the investment horizon of 90 days Tesla Inc is expected to generate 4.72 times more return on investment than RS Public. However, Tesla is 4.72 times more volatile than RS Public. It trades about 0.18 of its potential returns per unit of risk. RS Public is currently generating about -0.38 per unit of risk. If you would invest  35,142  in Tesla Inc on October 4, 2024 and sell it today you would earn a total of  5,242  from holding Tesla Inc or generate 14.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	86.36%
Values	Daily Returns

Tesla Inc  vs.  RS Public

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.

RS Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RS Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, RS Public is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Tesla and RS Public

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

The idea behind Tesla Inc and RS Public 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.