Correlation Between Federal Home and Tesla
Can any of the company-specific risk be diversified away by investing in both Federal Home 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 Federal Home and Tesla into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Home 530 and Tesla Inc, you can compare the effects of market volatilities on Federal Home 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 Federal Home with a short position of Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Home and Tesla.
Diversification Opportunities for Federal Home and Tesla
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Federal and Tesla is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Federal Home 530 and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc and Federal Home 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 Federal Home 530 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 Federal Home i.e., Federal Home and Tesla go up and down completely randomly.
Pair Corralation between Federal Home and Tesla
Assuming the 90 days horizon Federal Home 530 is expected to generate 1.38 times more return on investment than Tesla. However, Federal Home is 1.38 times more volatile than Tesla Inc. It trades about 0.08 of its potential returns per unit of risk. Tesla Inc is currently generating about 0.08 per unit of risk. If you would invest 375.00 in Federal Home 530 on September 13, 2024 and sell it today you would earn a total of 1,317 from holding Federal Home 530 or generate 351.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federal Home 530 vs. Tesla Inc
Performance |
| Timeline |
| Federal Home 530 |
| Tesla Inc |
Federal Home and Tesla Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Home and Tesla
The main advantage of trading using opposite Federal Home and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Home 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.| Federal Home vs. Tesla Inc | Federal Home vs. Iridium Communications | Federal Home vs. Deluxe | Federal Home vs. NuRAN Wireless |
Check out your portfolio center.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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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