Correlation Between Tesla and Brinks
Can any of the company-specific risk be diversified away by investing in both Tesla and Brinks 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 Tesla and Brinks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and The Brinks, you can compare the effects of market volatilities on Tesla and Brinks 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 Tesla with a short position of Brinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Brinks.
Diversification Opportunities for Tesla and Brinks
Pay attention - limited upside
The 3 months correlation between Tesla and Brinks is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and The Brinks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brinks and Tesla 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 Tesla Inc are associated (or correlated) with Brinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brinks has no effect on the direction of Tesla i.e., Tesla and Brinks go up and down completely randomly.
Pair Corralation between Tesla and Brinks
Assuming the 90 days trading horizon Tesla Inc is expected to generate 2.29 times more return on investment than Brinks. However, Tesla is 2.29 times more volatile than The Brinks. It trades about 0.46 of its potential returns per unit of risk. The Brinks is currently generating about -0.09 per unit of risk. If you would invest 31,780 in Tesla Inc on September 29, 2024 and sell it today you would earn a total of 10,235 from holding Tesla Inc or generate 32.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tesla Inc vs. The Brinks
Performance |
| Timeline |
| Tesla Inc |
| Brinks |
Tesla and Brinks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and Brinks
The main advantage of trading using opposite Tesla and Brinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, Brinks 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 Brinks will offset losses from the drop in Brinks' long position.The idea behind Tesla Inc and The Brinks 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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