Correlation Between SNDL and Tesla
Can any of the company-specific risk be diversified away by investing in both SNDL 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 SNDL and Tesla into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SNDL Inc and Tesla Inc, you can compare the effects of market volatilities on SNDL 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 SNDL with a short position of Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of SNDL and Tesla.
Diversification Opportunities for SNDL and Tesla
Excellent diversification
The 3 months correlation between SNDL and Tesla is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding SNDL Inc and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc and SNDL 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 SNDL Inc 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 SNDL i.e., SNDL and Tesla go up and down completely randomly.
Pair Corralation between SNDL and Tesla
Given the investment horizon of 90 days SNDL Inc is expected to under-perform the Tesla. But the stock apears to be less risky and, when comparing its historical volatility, SNDL Inc is 2.46 times less risky than Tesla. The stock trades about -0.32 of its potential returns per unit of risk. The Tesla Inc is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest 32,849 in Tesla Inc on September 13, 2024 and sell it today you would earn a total of 9,628 from holding Tesla Inc or generate 29.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SNDL Inc vs. Tesla Inc
Performance |
| Timeline |
| SNDL Inc |
| Tesla Inc |
SNDL and Tesla Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SNDL and Tesla
The main advantage of trading using opposite SNDL and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SNDL 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.The idea behind SNDL Inc and Tesla Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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