Correlation Between AVANTOR and Tesla

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

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

Diversification Opportunities for AVANTOR and Tesla

-0.55

Correlation Coefficient

AVANTOR  Tesla

Excellent diversification

The 3 months correlation between AVANTOR and Tesla is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding AVANTOR FDG INC and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc and AVANTOR 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 AVANTOR FDG INC are associated (or correlated) with Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc has no effect on the direction of AVANTOR i.e., AVANTOR and Tesla go up and down completely randomly.

Pair Corralation between AVANTOR and Tesla

Assuming the 90 days trading horizon AVANTOR FDG INC is expected to under-perform the Tesla. But the bond apears to be less risky and, when comparing its historical volatility, AVANTOR FDG INC is 6.03 times less risky than Tesla. The bond trades about -0.14 of its potential returns per unit of risk. The Tesla Inc is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  21,060  in Tesla Inc on August 31, 2024 and sell it today you would earn a total of  12,229  from holding Tesla Inc or generate 58.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

AVANTOR FDG INC  vs.  Tesla Inc

AVANTOR FDG INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AVANTOR FDG INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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 AVANTOR FDG INC investors.

Tesla Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 13 (%) 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.

Pair Trading with AVANTOR and Tesla

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

The idea behind AVANTOR FDG INC and Tesla 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.