Correlation Between Tesla and Reservoir Media

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

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

Diversification Opportunities for Tesla and Reservoir Media

0.65

Correlation Coefficient

Tesla  Reservoir Media

Poor diversification

The 3 months correlation between Tesla and Reservoir is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Reservoir Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reservoir Media 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 Reservoir Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reservoir Media has no effect on the direction of Tesla i.e., Tesla and Reservoir Media go up and down completely randomly.

Pair Corralation between Tesla and Reservoir Media

Given the investment horizon of 90 days Tesla Inc is expected to generate 2.09 times more return on investment than Reservoir Media. However, Tesla is 2.09 times more volatile than Reservoir Media. It trades about 0.19 of its potential returns per unit of risk. Reservoir Media is currently generating about 0.18 per unit of risk. If you would invest  21,060  in Tesla Inc on September 2, 2024 and sell it today you would earn a total of  13,456  from holding Tesla Inc or generate 63.89% 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.  Reservoir Media

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.

Reservoir Media

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Reservoir Media are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Reservoir Media reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tesla and Reservoir Media

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

The idea behind Tesla Inc and Reservoir Media 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.