Correlation Between Tesla and Rio Paranapanema

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

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

Diversification Opportunities for Tesla and Rio Paranapanema

-0.49

Correlation Coefficient

Tesla  Rio Paranapanema

Very good diversification

The 3 months correlation between Tesla and Rio is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Rio Paranapanema Energia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Paranapanema Energia 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 Rio Paranapanema. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rio Paranapanema Energia has no effect on the direction of Tesla i.e., Tesla and Rio Paranapanema go up and down completely randomly.

Pair Corralation between Tesla and Rio Paranapanema

Assuming the 90 days trading horizon Tesla Inc is expected to under-perform the Rio Paranapanema. In addition to that, Tesla is 1.47 times more volatile than Rio Paranapanema Energia. It trades about -0.16 of its total potential returns per unit of risk. Rio Paranapanema Energia is currently generating about 0.1 per unit of volatility. If you would invest  2,700  in Rio Paranapanema Energia on December 25, 2024 and sell it today you would earn a total of  500.00  from holding Rio Paranapanema Energia or generate 18.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Tesla Inc  vs.  Rio Paranapanema Energia

Tesla Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tesla Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Rio Paranapanema Energia

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rio Paranapanema Energia are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Rio Paranapanema unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tesla and Rio Paranapanema

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

The idea behind Tesla Inc and Rio Paranapanema Energia 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.