Correlation Between Stem and Tesla
Can any of the company-specific risk be diversified away by investing in both Stem 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 Stem and Tesla into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stem Inc and Tesla Inc, you can compare the effects of market volatilities on Stem 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 Stem with a short position of Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stem and Tesla.
Diversification Opportunities for Stem and Tesla
Modest diversification
The 3 months correlation between Stem and Tesla is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Stem Inc and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc and Stem 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 Stem 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 Stem i.e., Stem and Tesla go up and down completely randomly.
Pair Corralation between Stem and Tesla
Given the investment horizon of 90 days Stem Inc is expected to under-perform the Tesla. In addition to that, Stem is 2.25 times more volatile than Tesla Inc. It trades about -0.03 of its total potential returns per unit of risk. Tesla Inc is currently generating about 0.06 per unit of volatility. If you would invest 19,464 in Tesla Inc on November 2, 2024 and sell it today you would earn a total of 22,465 from holding Tesla Inc or generate 115.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stem Inc vs. Tesla Inc
Performance |
| Timeline |
| Stem Inc |
| Tesla Inc |
Stem and Tesla Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stem and Tesla
The main advantage of trading using opposite Stem and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stem 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.| Stem vs. Palo Alto Networks | Stem vs. Crowdstrike Holdings | Stem vs. Cloudflare | Stem vs. Palantir Technologies Class |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
Other Complementary Tools
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance |