Correlation Between Tesla and 00108WAH3

Can any of the company-specific risk be diversified away by investing in both Tesla and 00108WAH3 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 00108WAH3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tesla Inc and AEP TEX INC, you can compare the effects of market volatilities on Tesla and 00108WAH3 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 00108WAH3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and 00108WAH3.

Diversification Opportunities for Tesla and 00108WAH3

-0.53

Correlation Coefficient

Tesla  00108WAH3

Excellent diversification

The 3 months correlation between Tesla and 00108WAH3 is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and AEP TEX INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEP TEX INC 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 00108WAH3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEP TEX INC has no effect on the direction of Tesla i.e., Tesla and 00108WAH3 go up and down completely randomly.

Pair Corralation between Tesla and 00108WAH3

Given the investment horizon of 90 days Tesla Inc is expected to under-perform the 00108WAH3. In addition to that, Tesla is 3.0 times more volatile than AEP TEX INC. It trades about -0.14 of its total potential returns per unit of risk. AEP TEX INC is currently generating about -0.32 per unit of volatility. If you would invest  9,643  in AEP TEX INC on October 25, 2024 and sell it today you would lose (584.00) from holding AEP TEX INC or give up 6.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	78.95%
Values	Daily Returns

Tesla Inc  vs.  AEP TEX INC

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.

AEP TEX INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AEP TEX INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for AEP TEX INC investors.

Pair Trading with Tesla and 00108WAH3

The main advantage of trading using opposite Tesla and 00108WAH3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, 00108WAH3 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 00108WAH3 will offset losses from the drop in 00108WAH3's long position.

The idea behind Tesla Inc and AEP TEX INC 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.