Correlation Between Tesla and Northland Power
Can any of the company-specific risk be diversified away by investing in both Tesla and Northland Power 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 Northland Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc CDR and Northland Power, you can compare the effects of market volatilities on Tesla and Northland Power 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 Northland Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Northland Power.
Diversification Opportunities for Tesla and Northland Power
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Tesla and Northland is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc CDR and Northland Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northland Power 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 CDR are associated (or correlated) with Northland Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northland Power has no effect on the direction of Tesla i.e., Tesla and Northland Power go up and down completely randomly.
Pair Corralation between Tesla and Northland Power
Assuming the 90 days trading horizon Tesla Inc CDR is expected to generate 3.07 times more return on investment than Northland Power. However, Tesla is 3.07 times more volatile than Northland Power. It trades about 0.36 of its potential returns per unit of risk. Northland Power is currently generating about -0.22 per unit of risk. If you would invest 1,951 in Tesla Inc CDR on August 24, 2024 and sell it today you would earn a total of 1,148 from holding Tesla Inc CDR or generate 58.84% 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 CDR vs. Northland Power
Performance |
| Timeline |
| Tesla Inc CDR |
| Northland Power |
Tesla and Northland Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and Northland Power
The main advantage of trading using opposite Tesla and Northland Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, Northland Power 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 Northland Power will offset losses from the drop in Northland Power's long position.| Tesla vs. North American Construction | Tesla vs. Cogeco Communications | Tesla vs. Bird Construction | Tesla vs. Precious Metals And |
| Northland Power vs. Brookfield Renewable Partners | Northland Power vs. Algonquin Power Utilities | Northland Power vs. Innergex Renewable Energy | Northland Power vs. Capital Power |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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