Correlation Between Talen Energy and Tesla
Can any of the company-specific risk be diversified away by investing in both Talen Energy 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 Talen Energy and Tesla into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Talen Energy and Tesla Inc, you can compare the effects of market volatilities on Talen Energy 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 Talen Energy with a short position of Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of Talen Energy and Tesla.
Diversification Opportunities for Talen Energy and Tesla
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Talen and Tesla is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Talen Energy and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc and Talen Energy 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 Talen Energy 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 Talen Energy i.e., Talen Energy and Tesla go up and down completely randomly.
Pair Corralation between Talen Energy and Tesla
Considering the 90-day investment horizon Talen Energy is expected to generate 2.54 times less return on investment than Tesla. But when comparing it to its historical volatility, Talen Energy is 1.63 times less risky than Tesla. It trades about 0.23 of its potential returns per unit of risk. Tesla Inc is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 21,365 in Tesla Inc on August 24, 2024 and sell it today you would earn a total of 12,599 from holding Tesla Inc or generate 58.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Talen Energy vs. Tesla Inc
Performance |
| Timeline |
| Talen Energy |
| Tesla Inc |
Talen Energy and Tesla Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Talen Energy and Tesla
The main advantage of trading using opposite Talen Energy and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Talen Energy 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.| Talen Energy vs. Tesla Inc | Talen Energy vs. Modine Manufacturing | Talen Energy vs. BorgWarner | Talen Energy vs. WiMi Hologram Cloud |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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