Correlation Between Tesla and Xiaomi
Can any of the company-specific risk be diversified away by investing in both Tesla and Xiaomi 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 Xiaomi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and Xiaomi, you can compare the effects of market volatilities on Tesla and Xiaomi 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 Xiaomi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Xiaomi.
Diversification Opportunities for Tesla and Xiaomi
Poor diversification
The 3 months correlation between Tesla and Xiaomi is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Xiaomi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiaomi 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 Xiaomi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiaomi has no effect on the direction of Tesla i.e., Tesla and Xiaomi go up and down completely randomly.
Pair Corralation between Tesla and Xiaomi
Assuming the 90 days trading horizon Tesla Inc is expected to generate 1.51 times more return on investment than Xiaomi. However, Tesla is 1.51 times more volatile than Xiaomi. It trades about 0.38 of its potential returns per unit of risk. Xiaomi is currently generating about 0.02 per unit of risk. If you would invest 488,587 in Tesla Inc on September 3, 2024 and sell it today you would earn a total of 211,413 from holding Tesla Inc or generate 43.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tesla Inc vs. Xiaomi
Performance |
| Timeline |
| Tesla Inc |
| Xiaomi |
Tesla and Xiaomi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and Xiaomi
The main advantage of trading using opposite Tesla and Xiaomi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, Xiaomi 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 Xiaomi will offset losses from the drop in Xiaomi's long position.| Tesla vs. Ford Motor | Tesla vs. The Select Sector | Tesla vs. Promotora y Operadora | Tesla vs. iShares Global Timber |
| Xiaomi vs. GMxico Transportes SAB | Xiaomi vs. First Majestic Silver | Xiaomi vs. UnitedHealth Group Incorporated | Xiaomi vs. Verizon Communications |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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