Correlation Between Primo Brands and Tesla
Can any of the company-specific risk be diversified away by investing in both Primo Brands 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 Primo Brands and Tesla into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Primo Brands and Tesla Inc, you can compare the effects of market volatilities on Primo Brands 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 Primo Brands with a short position of Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of Primo Brands and Tesla.
Diversification Opportunities for Primo Brands and Tesla
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Primo and Tesla is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Primo Brands and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc and Primo Brands 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 Primo Brands 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 Primo Brands i.e., Primo Brands and Tesla go up and down completely randomly.
Pair Corralation between Primo Brands and Tesla
Given the investment horizon of 90 days Primo Brands is expected to generate 1.34 times less return on investment than Tesla. But when comparing it to its historical volatility, Primo Brands is 2.32 times less risky than Tesla. It trades about 0.19 of its potential returns per unit of risk. Tesla Inc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 35,142 in Tesla Inc on November 3, 2024 and sell it today you would earn a total of 5,318 from holding Tesla Inc or generate 15.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Primo Brands vs. Tesla Inc
Performance |
| Timeline |
| Primo Brands |
| Tesla Inc |
Primo Brands and Tesla Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Primo Brands and Tesla
The main advantage of trading using opposite Primo Brands and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Primo Brands 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.| Primo Brands vs. Corsair Gaming | Primo Brands vs. Old Dominion Freight | Primo Brands vs. EvoAir Holdings | Primo Brands vs. flyExclusive, |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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