Correlation Between NYSE Composite and Tesla
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and Tesla into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Tesla Inc, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Tesla.
Diversification Opportunities for NYSE Composite and Tesla
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and Tesla is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc and NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and Tesla go up and down completely randomly.
Pair Corralation between NYSE Composite and Tesla
Assuming the 90 days trading horizon NYSE Composite is expected to generate 7.16 times less return on investment than Tesla. But when comparing it to its historical volatility, NYSE Composite is 7.7 times less risky than Tesla. It trades about 0.26 of its potential returns per unit of risk. Tesla Inc is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 25,952 in Tesla Inc on August 30, 2024 and sell it today you would earn a total of 7,337 from holding Tesla Inc or generate 28.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Tesla Inc
Performance |
| Timeline |
NYSE Composite and Tesla Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Tesla Inc
Pair trading matchups for Tesla
Pair Trading with NYSE Composite and Tesla
The main advantage of trading using opposite NYSE Composite and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. Delek Drilling | NYSE Composite vs. Helmerich and Payne | NYSE Composite vs. Waste Management | NYSE Composite vs. US Global Investors |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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