Correlation Between Zapp Electric and Tesla

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

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

Diversification Opportunities for Zapp Electric and Tesla

0.74

Correlation Coefficient

Zapp Electric  Tesla

Poor diversification

The 3 months correlation between Zapp and Tesla is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Zapp Electric Vehicles and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc and Zapp Electric 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 Zapp Electric Vehicles 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 Zapp Electric i.e., Zapp Electric and Tesla go up and down completely randomly.

Pair Corralation between Zapp Electric and Tesla

Given the investment horizon of 90 days Zapp Electric Vehicles is expected to generate 1.65 times more return on investment than Tesla. However, Zapp Electric is 1.65 times more volatile than Tesla Inc. It trades about -0.06 of its potential returns per unit of risk. Tesla Inc is currently generating about -0.15 per unit of risk. If you would invest  130.00  in Zapp Electric Vehicles on December 27, 2024 and sell it today you would lose (46.00) from holding Zapp Electric Vehicles or give up 35.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Zapp Electric Vehicles  vs.  Tesla Inc

Zapp Electric Vehicles

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zapp Electric Vehicles has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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 abnormal 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.

Pair Trading with Zapp Electric and Tesla

The main advantage of trading using opposite Zapp Electric and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zapp Electric 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 Zapp Electric Vehicles 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.