Correlation Between Tesla and Southland Holdings

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

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

Diversification Opportunities for Tesla and Southland Holdings

-0.35

Correlation Coefficient

Tesla  Southland Holdings

Very good diversification

The 3 months correlation between Tesla and Southland is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Southland Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southland Holdings 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 Southland Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southland Holdings has no effect on the direction of Tesla i.e., Tesla and Southland Holdings go up and down completely randomly.

Pair Corralation between Tesla and Southland Holdings

Given the investment horizon of 90 days Tesla Inc is expected to generate 1.19 times more return on investment than Southland Holdings. However, Tesla is 1.19 times more volatile than Southland Holdings. It trades about 0.34 of its potential returns per unit of risk. Southland Holdings is currently generating about 0.19 per unit of risk. If you would invest  34,203  in Tesla Inc on September 21, 2024 and sell it today you would earn a total of  9,414  from holding Tesla Inc or generate 27.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Tesla Inc  vs.  Southland Holdings

Tesla Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 16 (%) 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.

Southland Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southland Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Southland Holdings is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Tesla and Southland Holdings

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

The idea behind Tesla Inc and Southland Holdings 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.