Correlation Between Leons Furniture and Tesla
Can any of the company-specific risk be diversified away by investing in both Leons Furniture 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 Leons Furniture and Tesla into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leons Furniture Limited and Tesla Inc CDR, you can compare the effects of market volatilities on Leons Furniture 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 Leons Furniture with a short position of Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leons Furniture and Tesla.
Diversification Opportunities for Leons Furniture and Tesla
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Leons and Tesla is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Leons Furniture Limited and Tesla Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc CDR and Leons Furniture 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 Leons Furniture Limited 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 CDR has no effect on the direction of Leons Furniture i.e., Leons Furniture and Tesla go up and down completely randomly.
Pair Corralation between Leons Furniture and Tesla
Assuming the 90 days trading horizon Leons Furniture Limited is expected to under-perform the Tesla. But the stock apears to be less risky and, when comparing its historical volatility, Leons Furniture Limited is 3.88 times less risky than Tesla. The stock trades about -0.15 of its potential returns per unit of risk. The Tesla Inc CDR is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 2,394 in Tesla Inc CDR on August 29, 2024 and sell it today you would earn a total of 687.00 from holding Tesla Inc CDR or generate 28.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leons Furniture Limited vs. Tesla Inc CDR
Performance |
| Timeline |
| Leons Furniture |
| Tesla Inc CDR |
Leons Furniture and Tesla Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leons Furniture and Tesla
The main advantage of trading using opposite Leons Furniture and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leons Furniture 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.| Leons Furniture vs. Telus Corp | Leons Furniture vs. Toronto Dominion Bank | Leons Furniture vs. Manulife Financial Corp | Leons Furniture vs. Canadian Natural Resources |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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