Correlation Between Tesla and SES AI

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

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

Diversification Opportunities for Tesla and SES AI

0.31

Correlation Coefficient

Tesla  SES AI

Weak diversification

The 3 months correlation between Tesla and SES is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and SES AI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SES AI 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 SES AI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SES AI Corp has no effect on the direction of Tesla i.e., Tesla and SES AI go up and down completely randomly.

Pair Corralation between Tesla and SES AI

Given the investment horizon of 90 days Tesla is expected to generate 1.49 times less return on investment than SES AI. But when comparing it to its historical volatility, Tesla Inc is 3.73 times less risky than SES AI. It trades about 0.24 of its potential returns per unit of risk. SES AI Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  70.00  in SES AI Corp on October 20, 2024 and sell it today you would earn a total of  23.00  from holding SES AI Corp or generate 32.86% return on investment over 90 days.

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

Tesla Inc  vs.  SES AI Corp

Tesla Inc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 18 (%) 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.

SES AI Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SES AI Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, SES AI unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tesla and SES AI

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

The idea behind Tesla Inc and SES AI 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.