Correlation Between Tesla and Novartis
Can any of the company-specific risk be diversified away by investing in both Tesla and Novartis 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 Novartis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and Novartis AG, you can compare the effects of market volatilities on Tesla and Novartis 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 Novartis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Novartis.
Diversification Opportunities for Tesla and Novartis
Very good diversification
The 3 months correlation between Tesla and Novartis is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Novartis AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novartis AG 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 Novartis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novartis AG has no effect on the direction of Tesla i.e., Tesla and Novartis go up and down completely randomly.
Pair Corralation between Tesla and Novartis
Assuming the 90 days trading horizon Tesla Inc is expected to generate 2.76 times more return on investment than Novartis. However, Tesla is 2.76 times more volatile than Novartis AG. It trades about 0.2 of its potential returns per unit of risk. Novartis AG is currently generating about 0.11 per unit of risk. If you would invest 245,706 in Tesla Inc on September 20, 2024 and sell it today you would earn a total of 641,785 from holding Tesla Inc or generate 261.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tesla Inc vs. Novartis AG
Performance |
| Timeline |
| Tesla Inc |
| Novartis AG |
Tesla and Novartis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and Novartis
The main advantage of trading using opposite Tesla and Novartis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, Novartis 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 Novartis will offset losses from the drop in Novartis' long position.| Tesla vs. McEwen Mining | Tesla vs. Southern Copper | Tesla vs. Grupo Sports World | Tesla vs. Hoteles City Express |
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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.
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