Correlation Between Tesla and Select Sector
Can any of the company-specific risk be diversified away by investing in both Tesla and Select Sector 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 Select Sector 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 Select Sector, you can compare the effects of market volatilities on Tesla and Select Sector 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 Select Sector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Select Sector.
Diversification Opportunities for Tesla and Select Sector
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tesla and Select is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and The Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Sector 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 Select Sector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Sector has no effect on the direction of Tesla i.e., Tesla and Select Sector go up and down completely randomly.
Pair Corralation between Tesla and Select Sector
Assuming the 90 days trading horizon Tesla Inc is expected to generate 3.09 times more return on investment than Select Sector. However, Tesla is 3.09 times more volatile than The Select Sector. It trades about 0.21 of its potential returns per unit of risk. The Select Sector is currently generating about 0.06 per unit of risk. If you would invest 481,148 in Tesla Inc on September 4, 2024 and sell it today you would earn a total of 247,840 from holding Tesla Inc or generate 51.51% 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. The Select Sector
Performance |
Timeline |
Tesla Inc |
Select Sector |
Tesla and Select Sector Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Tesla and Select Sector
The main advantage of trading using opposite Tesla and Select Sector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, Select Sector 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 Select Sector will offset losses from the drop in Select Sector's long position.Tesla vs. Grupo Sports World | Tesla vs. CVS Health | Tesla vs. Lloyds Banking Group | Tesla vs. Prudential Financial |
Select Sector vs. Vanguard Index Funds | Select Sector vs. Vanguard Index Funds | Select Sector vs. Vanguard STAR Funds | Select Sector vs. SPDR SP 500 |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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