Correlation Between Meta Platforms and Tesla
Can any of the company-specific risk be diversified away by investing in both Meta Platforms 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 Meta Platforms and Tesla into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meta Platforms CDR and Tesla Inc CDR, you can compare the effects of market volatilities on Meta Platforms 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 Meta Platforms with a short position of Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta Platforms and Tesla.
Diversification Opportunities for Meta Platforms and Tesla
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Meta and Tesla is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms CDR 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 Meta Platforms 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 Meta Platforms CDR 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 Meta Platforms i.e., Meta Platforms and Tesla go up and down completely randomly.
Pair Corralation between Meta Platforms and Tesla
Assuming the 90 days trading horizon Meta Platforms CDR is expected to under-perform the Tesla. But the stock apears to be less risky and, when comparing its historical volatility, Meta Platforms CDR is 3.73 times less risky than Tesla. The stock trades about 0.0 of its potential returns per unit of risk. The Tesla Inc CDR is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 1,951 in Tesla Inc CDR on August 24, 2024 and sell it today you would earn a total of 1,148 from holding Tesla Inc CDR or generate 58.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meta Platforms CDR vs. Tesla Inc CDR
Performance |
| Timeline |
| Meta Platforms CDR |
| Tesla Inc CDR |
Meta Platforms and Tesla Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meta Platforms and Tesla
The main advantage of trading using opposite Meta Platforms and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Platforms 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.| Meta Platforms vs. NeXGold Mining Corp | Meta Platforms vs. Mako Mining Corp | Meta Platforms vs. Constellation Software | Meta Platforms vs. Perseus Mining |
| Tesla vs. Income Financial Trust | Tesla vs. Brookfield Investments | Tesla vs. Royal Bank of | Tesla vs. Everyday People Financial |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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