Correlation Between Tesla and Lennar

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

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

Diversification Opportunities for Tesla and Lennar

-0.72

Correlation Coefficient

Tesla  Lennar

Pay attention - limited upside

The 3 months correlation between Tesla and Lennar is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar 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 Lennar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennar has no effect on the direction of Tesla i.e., Tesla and Lennar go up and down completely randomly.

Pair Corralation between Tesla and Lennar

Assuming the 90 days trading horizon Tesla Inc is expected to generate 1.74 times more return on investment than Lennar. However, Tesla is 1.74 times more volatile than Lennar. It trades about 0.07 of its potential returns per unit of risk. Lennar is currently generating about 0.07 per unit of risk. If you would invest  3,793  in Tesla Inc on October 3, 2024 and sell it today you would earn a total of  4,234  from holding Tesla Inc or generate 111.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	83.54%
Values	Daily Returns

Tesla Inc  vs.  Lennar

Tesla Inc

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Tesla sustained solid returns over the last few months and may actually be approaching a breakup point.

Lennar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lennar 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 technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Tesla and Lennar

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

The idea behind Tesla Inc and Lennar 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.