Correlation Between Tesla and Spanish Mountain

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

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

Diversification Opportunities for Tesla and Spanish Mountain

-0.9

Correlation Coefficient

Tesla  Spanish Mountain

Pay attention - limited upside

The 3 months correlation between Tesla and Spanish is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Spanish Mountain Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spanish Mountain Gold 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 Spanish Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spanish Mountain Gold has no effect on the direction of Tesla i.e., Tesla and Spanish Mountain go up and down completely randomly.

Pair Corralation between Tesla and Spanish Mountain

Given the investment horizon of 90 days Tesla Inc is expected to generate 0.64 times more return on investment than Spanish Mountain. However, Tesla Inc is 1.56 times less risky than Spanish Mountain. It trades about 0.08 of its potential returns per unit of risk. Spanish Mountain Gold is currently generating about 0.01 per unit of risk. If you would invest  12,315  in Tesla Inc on October 9, 2024 and sell it today you would earn a total of  27,345  from holding Tesla Inc or generate 222.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Tesla Inc  vs.  Spanish Mountain Gold

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.

Spanish Mountain Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spanish Mountain Gold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Tesla and Spanish Mountain

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

The idea behind Tesla Inc and Spanish Mountain Gold 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.